French risk managers step up communication effort on risks

The effort to improve communication about risks has been a priority for the Association pour le Management des Risques et de l'Assurance des Entreprises, AMRAE, France's risk management association. AMRAE’s leaders believe that risk managers must be able to communicate not only with their bosses, but also with fellow staff members, clients, suppliers and shareholders who will read the risk management section within annual reports. And maybe even the public. This week, the association gathered a group of journalists from French financial and trade publications (including Rodrigo Amaral, CRE's Iberian and French correspondent) to talk about risks, as part of its efforts to spread the risk management gospel.hideThe hacks were treated to a plush lunch while Bénédicte de Luze, AMRAE's scientific director, made a presentation about the latest regulatory developments that have boosted the role played by French risk managers in their companies. In between the slides, Bruno Dunoyer de Segonzac, a vice-president of the association, provided examples of real life situations where risk managers are called upon to act and the difficulties they find in their daily jobs. A task that has been made more difficult because the recent financial crisis has heightened risk aversion in the minds of many executives, he said. "It is difficult to talk about risks, especially when they are very much on the operational side," Mr Dunoyer de Segonzac said. "For example, it is hard to talk to a CEO about the risk appetite of the company. If you just ask him: ‘What is the risk appetite?’ he is very likely to answer: ‘none.’ Therefore, risk managers need to employ much clarity when they are making their cases, not least because their input will be of great value for top managers to make informed decisions. Companies have grown so complex that it is impossible for a CEO to know everything about it," he pointed out. But taking risks is a necessity as the pace of growth achieved by companies is linked to their ability to make good risky decisions. That is true even for whole national economies, Mr Dunoyer de Segonzac noted, stressing that China is a country where many risks are taken, and economic growth rates have been spectacular for years. "The role of risk managers is not to prevent risks from being taken, but to identify them properly and to manage them," Mr Dunoyer de Segonzac remarked. "And transparency about risks is a very important matter, not the least because this kind of information will inform shareholders on their investment decisions. Therefore, risk management goes well beyond the daily management of companies," he continued. That is the reason why, according to the AMRAE vice-president, the ability to communicate efficiently is a major asset for risk managers nowadays. They must be able to interact with different sectors of their companies, to make their message understood by all kinds of stakeholders, to project confidence so that people can also feel comfortable disclosing their ideas to them and to show willingness to listen and to act on the information gathered. Additionally, he said, risk managers must have a thorough technical knowledge about all the activities performed by their companies in order to transmit an image of conviction, authority and credibility. A particular preoccupation of AMRAE, and one that was tackled during the meeting with the press, was the challenge to spread risk management practices down to small and medium companies with which they work. Such partners will often argue that, in the current economic situation, they can hardly afford to hire a risk manager and implement costly and sophisticated systems to manage their risks. But Mr Dunoyer de Segonzac stressed that in SMEs, the owner must be aware of the risks as they meet them in their daily operations and often there is no need to take a complex approach to the task. "Risk management is about simple solutions,” he said. “It is about managing nightmares.” The part of the presentation on SMEs promptly generated questions by journalists on whether large companies, which form the bulk of AMRAE members, use their economic weight to impose their risk management views on smaller partners, something that was promptly denied by the association. In fact, AMRAE has made it very clear that it opposes the imposition of risk management norms that all companies should follow on a mandatory basis. "Normalisation generates the risk that companies stop following the evolution of their risks because they meet the norms," Mr Dunoyer de Segonzac said. In the past two weeks, coverage in the French media has been dominated by the detention of former president of the International Monetary Fund, Dominique Strauss-Kahn, for an alleged sexual assault in the United States. Mr Strauss-Kahn was a candidate for the French presidency in the elections that will take place next year. The subject could not be ignored during AMRAE's meeting with the hacks either. Let us imagine that, instead of the IMF, Mr Strauss-Kahn headed a large French company. Would risks managers have a plan or process in place to deal with such an affair? "Many companies evaluate risks related to the behaviour of top executives, but often the conclusion is that these risks don't threaten the economic performance or their operational side," said Mr Dunoyer de Segonzac. But he conceded that in such a case there would also be risks related to marketing and reputation involved. So this appears to be a tough problem. It seems that, in France and elsewhere, there is no dearth of new subjects for risk managers to talk about.

French risk managers step up communication effort on risks

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