Experts tell risk managers how to make most of ‘strategic inflection point’

How to achieve such influence was laid bare by a range of experienced risk professionals during the event’s Chief Risk Officer forum panel debate. They told attendees that risk professionals must continually stress their value proposition, increase their use of risk quantification, ensure that a risk culture is embedded throughout their organisations and that risk becomes part of everyday strategic decision-making. Risk managers must position themselves close to top management in order to maximise the risk function’s reach and need to display passion, courage and communicate at a superior level to get their message across. According to keynote speaker Brian Link, ERM Director of the Asia Pacific Region at Ernst & Young, the time has come for risk professionals to deliver on their long-held promise to align the risk function with strategic decision-making.hide“We are at an exciting time where we are bearing witness to a strategic inflection point for the practice of risk management. The time has come for risk managers to either get on board or get out,” he said. He believes that risk managers must improve their risk quantification capabilities via information technology and the use of models to achieve this breakthrough. The new and improved tools on offer to risk management that have helped to create the inflection point now ‘allow the profession to deliver on promises that have long been spoken about but were not necessarily deliverable’, he argued. But he warned that risk professionals must use the tools wisely. “Quantification can be a great tool or a blunt instrument deepening on how you implement and use it.” Experts on ‘The major challenges facing Chief Risk Officers – what keeps them awake at night?’ panel debate agreed that risk professionals could, and should, make more use of risk quantification. “Quantification is key for corporate risk managers as well as those in the financial sector. The application of quantification of risk could be used a lot more widely. We need more education around the importance of that and how it can be used,” said Ron Maurich, Chief Risk Officer at the grain storage and handling network CBH Group, who was named RMIA Risk Manager of the Year for 2011 at the conference. Head of Risk Management and Compliance at Zurich Australia, and fellow panel member Geoffrey Copp, argued that risk managers at financial services firms in particular need to improve their risk quantification capabilities. “For financial services firms more highly skilled quantifying of risk is going to be key. On the actuarial side that has got to grow to be a lot stronger, and I believe it will do so. Quantification and quite sophisticated modelling is going to be a key development,” he said. The experts all agreed the challenge for risk managers is to embed risk throughout an organisation and ensure the risk function is aligned with strategic decision-making. This journey will be long and hard fought, they said, and a never-ending pursuit. “I think it will be a long process but I see us needing to get to a position where risk is at the table of all of the key strategic decision processes in terms of being well considered and forming part of the decision making at the top level. If you capture it at that level it filters downstream like everything else,” said Mr Maurich. When trying to champion risk management, particularly at companies where the function is new and immature, it is imperative to promote and prove its value proposition, rather than simply talking about issues such as governance and compliance, continued the risk manager of the year. “The journey never ends. As you build the risk maturity curve you have to continue to bring your organisation with you. To do this you must prove risk managements’ value and new management has to be continually shown the value you are bringing back to the business,” he stressed. Proving the value added by risk management was a theme warmed to by Caroline James, Principal Advisor—Group Risk at mining company Rio Tinto. Asked what an organisation would lose if its risk management function was abolished, she cited the ability to see across the entire business and then embed a risk culture. “The business would lose the value added that we bring across the whole business. We are one of the few functions that can see what all the other functions are doing—we are not just interested in our own silo. We are one of the few people that can see the whole jigsaw puzzle and bring things together. So you would lose the oversight across the whole governance model and our ability to track emerging risks. You would basically lose the ability to embed risk across the organisation,” she argued. The ultimate aim is to ensure that risk management is seen as an integral part of everyday business processes, continued Ms James. It should not be seen as separate or an add on, but an integral part of what all employees do everyday, she added. “It should be part of every business degree course and qualification.” For his part Anthony Ventura, Chief Risk Officer at the Australian state of Victoria’s health and safety organisation WorkSafe, urged risk professionals to break down organisational barriers and ensure their influence is far reaching. “Whatever your title, risk management is about where you are positioned within an organisation and depending on where you are positioned you can or cannot lever activity. If you are close to the executive team you can challenge and push business a lot more. I think we should be more of an assurance function that is really challenging the whole organisation to perform. Whilst we are very good at focussing on the down side we must focus also on opportunity,” he told the delegates. To achieve their goals risk managers must be passionate, communicate effectively and have the courage to challenge top management and pre conceived ideas, the experts agreed. “You need to be a believer or a disciple of risk management in order to be able to sell the message,” said Mr Maurich. “As the champion of risk you need to be passionate in what you believe in and therefore be able to engage with the business and be the person that can really bring everyone together to speak a common risk language.” Drive, enthusiasm, tenacity and the ability to systematically and thoroughly explore an issue with an enquiring mind are key skills, noted Ms James. “But communication is key. You really need to have the self confidence to be able to go in front of a board, people who consider themselves much more senior and superior to you, and ask them those difficult questions and not be put off and scared,” she added. Ernst & Young’s Mr Link concluded his keynote speech with a similar message. “It really is a journey, and if the passion is not there amongst risk managers themselves and the executives risk will not embed. But if it is present then there is a great chance at this point in time to achieve your objectives,” he said.

Experts tell risk managers how to make most of ‘strategic inflection point’

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