Risk managers need to up communication game to gain interest of board: Polrisk

"Management boards are not always interested in risk management issues," said Sebastian Cwik, Head of the Corporate Risk Management Division of coal mining company Katowicki Holding Weglowy SA. Discussions about the topic make the board uneasy since risk managers often point out potential threats. "The board members see that there is a problem they have to tackle," he said. "We have to overcome this hurdle in the first place and show that risk management creates value for the company," Mr Cwik told the 50 or so delegates who participated in the seventh Polrisk conference.hideThe event, which usually takes place in winter, was brought forward to May, so it would not be so close to the Ferma Risk Management Forum that will take place from 29 September to 2 October in Maastricht. Unlike other European countries risk management is a relatively new discipline for many Polish companies, but one of growing importance since the market for commercial insurance cover has hardened considerably in recent years for Polish companies. While financial institutions like banks have to integrate sophisticated risk management into their business and often have a chief risk officer on the board dedicated to risk management, the picture is not the same for industry in Poland. "In some companies the management board has the topic on its agenda every quarter," said Bartosz Jura, Director of the Polish Risk Assurance Team of consultancy PwC. "Other management boards discuss risk management issues only once a year and spent only five minutes of the planned hour on it." Risk managers and board members have a communication problem in the first place, he believes. "The board does not know what they want and what they need," he said. It is a bad sign when management boards do not ask their risk managers any questions when they present the risk map because this is usually proof that the board has not understood the issues in question. From Mr Jura's point of view it lacks a proper cooperation model. "The board wants risk management but they do not understand it," he said. Risk managers on the other hand often have no idea what is expected of them and end up producing a lot of paper nobody is interested in, he added. Mr Cwik of Katowicki Holding Weglowy SA believes that there may be several reasons for the difficult relationship between risk managers and board members. "The board members may not be interested in risk management or there may be communication problems, so that both sides end up speaking a different language," he said. There also may be a lack of confidence. The board may not be convinced that the results presented by the risk manager are correct. "The board members may say that they have a different perception of the company's risk than the risk map shows, eg that a certain risk is not so great as the risk manager thinks," Mr Cwik explained. Waldemar Mnich, Direktor of the Internal Audit Office of public energy company PKP Energetyka, added that board members sometimes have a restricted view about specific risks. "The board may only be interested in market risks and tell the risk manager to focus on that," he said. "And once I get the management board interested in all risks the members change and I have to start all over again." From Mr Cwik's point of view risk managers and board members should engage in more intensive discussions to come to a common understanding of the company's risks. He also advised the delegates not to overload the supervisory board with information. "When risk managers present huge reports listing over 500 risks they have no chance of success from the start," he said. It may be enough to list 50 risks. Grant Purdy, Associate Director of consultancy Broadleaf Capital International and keynote speaker at the Polrisk conference, said that he supports the view that less complexity may help to improve the relationship between risk managers and board members. "My experience with board members is that they are well educated people, but there is a problem with the coherence of language and the complexity of information," he said. Boards tend to become sceptical when risk managers deliver very complex presentations. "They may then think that the risk managers do not understand the issue and that could be why they present such a mass of information," he said. On the other hand it is not enough to tell the executive team that everything is fine. "The board members want to be reassured that the key controls have been identified and are being managed," said Mr Purdy. He has observed that board members in general have experienced a steep learning curve in recent years when it comes to risk management. "Five years ago they were uninterested in risk management issues," he said. Now boards have understood that it facilitates the decision-making process-and want to have a closer look. "During the last two years boards have become more critical about risk information presented to them," he added. They do not want to see a simple heat map or a huge amount of data on risk management. Board members want to be informed about the quality of risk management, Mr Purdy believes. "Boards want to be actively involved in risk management," he said. "They know that they are personally liable if they do not care or do not ask for the right information." In addition the language risk managers use is often too complex and incoherent. External auditing companies that use their own language can add to the confusion. "We must move away from seeing the world through our eyes and try to see it through their eyes," he told the delegates with regard to their relationship to board members. From Mr Purdy's point of view the personal requirements for risk managers have also changed. It is more important that the person leading the risk management team has the right mindset than a lot of experience. "Having a vision is important as well as the ability to influence people and make the organisation move on," he said. It is no longer the case that people who are good with Excel can just take over. "The most successful risk managers are those with no prior experience who are just good managers," said Mr Purdy.

Risk managers need to up communication game to gain interest of board: Polrisk

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