Fast-changing business environment demands acrobatic risk management skills

Risk managers need to develop balancing skills that would not be out of place in a circus if they are to succeed in today’s ever more challenging environment. But being able to walk the organisational tightrope is not enough. They are also expected to continually upgrade their knowledge to keep pace with external risks faced by companies. These were some of the views expressed by Portuguese risk managers as part of this year’s Risk Frontiers Europe survey. The risk managers reflected on the fast-changing business environment in which their companies operate, and where risk management clashes with the need to remain nimble and ahead of the competition. “Companies now have to operate on an innovation and time-to-market basis. Nobody wants to see an Uber come along and take over their business,” said Paulo Moniz, head of security and IT risks at energy group EDP. “Sometimes there is little time to think things through thoroughly. The risk manager needs to be well versed in the company’s business so that she or he becomes an enabler and not a blocker of new initiatives,” he said. Adding: “If a risk manager becomes a block, they will kill the company. At the same time, if they are not aware of what the company is doing and let something pass that could later erode trust in the company, they are not doing their job. It is necessary to have acrobatic skills to maintain this balance.” Social media and new regulations have forced companies to act quickly in the face of complaints. “Consumers are better informed than ever before and their willingness to litigate has grown exponentially. Therefore, there is huge pressure on organisations to provide immediate answers to new issues,” said Jorge Neto, insurance manager at retail group Jerónimo Martins. “When a client files a complaint that needs to be answered the same day, it creates a lot of anxiety,” he continued. “The company may find out that it is committed to a kind of response that, in the end, is not the right one and it would have liked to follow a completely different road. It is a hard balance to find. We have to answer our customers’ complaints quickly or risk suffering harm to our image. On the other hand, we have to be very careful with the solutions that we are delivering,” added the risk manager. Companies are also growing targets for new threats, like hackers that roam the business world on the lookout for easy opportunities to make a buck. “Nowadays, threats to companies come from outside their own fields, as much as from the competition,” Mr Neto said. “Criminals look at sectors of the economy and try to identify where the vulnerabilities are, to attack organisations and make a quick profit. They do not care whether these are the top players in the retail or energy industry, their only focus is who are those that have the biggest security gaps,” he added. Participants in the roundtable pointed out that the sheer spread of risk requires risk managers to engage in a continuous process of self-improvement. “Risk managers have to constantly learn about new subjects, often by themselves. Take the case of data protection. It is an area that, not long ago, risk managers did not know that they would have to deal with,” said António Negreiro Fernandes, secretary-general of Apogeris, Portugal’s risk manager association. “Even if they are not the company expert on a given subject, risk managers need to learn about it, so that they can ask the right questions. This is a permanent job,” he added. Luis Filipe Caldas, a member of Apogeris’ board, added that risk managers need to be highly competent in their organisations’ area of business, be it IT, engineering, law or finance. “That will give them authority within the company and add value to the function. It is also necessary to learn through your experience in the company,” he said. “Risk managers need to have a work methodology and they need to know the company’s business well, so that they are able to identify its vulnerabilities,” he continued. Knowing the company’s business well, and staying on top of new developments, is vital so risk managers have the authority to make themselves heard by other parts of the company. “It is important that risk managers have a level of authority, earned from knowledge and competency. It is a function that you learn on the job. Learning is a permanent process and it is up to the risk manager’s flexibility and capacity to learn new subjects without becoming a specialist,” Mr Moniz said. “We have to understand the business in which the company operates and know the company’s risk appetite. Tolerance to risk is not the same in a large utilities group or in a start-up,” he added. Risk managers must also keep their minds open to new ideas, while not obsessing about the latest trend in risk management or other areas, the Risk Frontiers Europe participants said. “Risk managers have to avoid the temptation to become experts in any one particular field,” Mr Neto said. “If they do that, they will get themselves stuck into a silo.” “There is value when risk professionals show their usefulness as experts. But there may be more added value when they work with other parts of the company,” Mr Caldas agreed. “Risk managers can therefore show they are experts in their own area, but they can also help other functions to guarantee the continuity of the business,” he added.

Fast-changing business environment demands acrobatic risk management skills

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