Polish risk managers told to adapt and sell concepts to their boards

“We must move away from seeing the world through our eyes and start seeing it through their eyes,” Grant Purdy, Associate Director of consultancy Broadleaf Capital International, told the 50 delegates who participated in the annual conference of the Polish risk managers’ association Polrisk in Warsaw in May. Mr Purdy was the keynote speaker at the conference. He has been a specialist in the practical application of risk management for over 35 years and has helped create several norms in this field such as the ISO 31000. “One of the problems we face in the risk management profession is that we may be forced to do things which other people in the company do not perceive as value creating or value adding, e.g. getting them to complete forms and going to boring workshops,” he explained.hideOften the rest of the company does not understand the value that is being created through proper risk management. “This is our problem, not their problem,” Mr Purdy said. “We must change our language and our ways of managing risk instead of their ways of thinking.” It is important to come to a common understanding of risk and risk management in the first place. “There are often different views on what is risk and risk management,” explained Mr Purdy. “Unless we have a coherent and consistent view, we cannot really move forward. That is true for any organisation.” The globally accepted definition of risk is the effect uncertainty has on the company’s objectives. From Mr Purdy’s point of view, risk is not positive nor negative. “Most humans think that risk is negative, but if we do not take risks, life becomes pretty boring,” he said. According to his definition, risk management is ‘the process we use to inform decisions where we have inadequate information so that we improve the chances of obtaining our overall objectives.’ The consultant stressed that risk management is not static. “It is a dynamic decision support process, not something you do once year for some cosy governance purpose,” said Mr Purdy. “Risk management is something humans apply every day when making decisions,” he explained. Mr Purdy used an airplane captain as an example. The captain’s primary objective is to fly all the passengers to the destination while pursuing other minor goals such as the minimization of the fuel consumption via an ideal route. Uncertainties lie ahead. For example, unexpected turbulence may force the captain to adapt to new situations and sacrifice the minor objective by adjusting the course. But the captain will stick to reaching the destination. Doing risk management in a company is the same, explained Mr Purdy. “We set off with the best intentions of achieving our objectives, we have to do course corrections and we have to change direction to adapt to risks and sources of uncertainty in order to enable us to achieve our objectives,” he said. The outcome of good risk management is a more resilient organisation that can deal with uncertainty both internally and externally and can capitalise on that uncertainty, see opportunities and lead its market. Objectives can be achieved much faster and easier. Effective risk management is also a requirement that the Warsaw stock exchange demands from listed companies, stressed Mr Purdy. The typical mistake that companies make when they install risk management is to make it too complex. “You do not need to make it unnecessarily complex,” he told the delegates. “In fact, the more complex we make it, the more value we destroy and the more difficult it is for people to adopt, understand and appreciate the effect of risk management,” said Mr Purdy. The key to making risk management happen in an organisation is to have a proper risk management framework. “It is the essence of how we create risk management in the organisation”, explained Mr Purdy. The framework consists of two parts. The first is the expression of the organisation’s intentions. In this area the definition of standards is very important. This means ethics-based performance requirements for individuals in the organisation to ensure that there is effective risk management. “The standards should be short and crisp, so that people understand directly what they are expected to do,” Mr Purdy said. “Get away from details, complex policies and procedures.” The organisation’s intent should go beyond policy statements. “It is characterisised much more by the actions of the managers than what is written on a piece of paper,” he said. The second part of the framework is the capacity to manage risk according to the intent. “It comes as a surprise for some organisations that just by issuing written instructions, nothing happens, people do not change overnight,” explained Mr Purdy. Practice is necessary. From Mr Purdy’s point of view, this is the area where most organisations are very weak.“Somehow we believe that a two hour power point presentation is all the training most people need on risk management,” he said. “We need a comprehensive strategy for framing risk management which means training people in risk management.” However, workshops should not be dedicated to risk management only. “We should train people in other aspects of business such as safety or financial management and integrate risk management into that,” Mr Purdy explained. “If we want risk management to become effective, it has to be integrated.” From his point of view, integration with decision making is the only way to achieve true value from risk management. “Risk management on its own is worthless, in fact less than worthless because we waste time doing it,” he said. This is also the way to make risk management relevant to the rest of the organisation and overcome the unwillingness to participate in it. “People are not motivated in risk management because it is only linked to reporting and the generation of paper,” said Mr Purdy. “This feels worthless and does not create value for the organisation.” It is important that risk management is integrated into day-to-day activities. “This involves seeing the world through other peoples’ eyes,” said Mr Purdy. “We must understand how they make decisions and then look what we can do to improve decision making processes,” he added. Risk management is at its best when it is totally subsumed into the organisation’s existing system of management and decision making processes, Mr Purdy concluded at the Polrisk event.

Polish risk managers told to adapt and sell concepts to their boards

Want to read this article?

Read Next

Index finds European organisations failing on diversity equity and inclusion

Costs triple to outpace premiums for Europe’s insurers in 2023

PoloWorks launches MGA incubator

Time for risk and insurance managers to shine: Natividad

Brazilian floods put focus on risk prevention failures as climate change hits

Index finds European organisations failing on diversity equity and inclusion

Costs triple to outpace premiums for Europe’s insurers in 2023

PoloWorks launches MGA incubator

Time for risk and insurance managers to shine: Natividad

Brazilian floods put focus on risk prevention failures as climate change hits

Want to read this article?

Read Next

Index finds European organisations failing on diversity equity and inclusion

Costs triple to outpace premiums for Europe’s insurers in 2023

PoloWorks launches MGA incubator

Time for risk and insurance managers to shine: Natividad

Brazilian floods put focus on risk prevention failures as climate change hits

Related Articles