Risk managers should grasp opportunity provided by risk reporting trend, says Airmic

Risk managers should use rising risk reporting requirements to raise their profile and reach out to other business functions, according to Airmic. UK companies have been subjected to a slew of new reporting requirements, many of which are focused on risk. Listed or large companies are now required to report on gender pay, modern slavery in the supply chain, executive pay and, most recently, climate change. This year has also seen changes to the UK Corporate Governance Code, including a new requirement to report on emerging risks and a new UK Stewardship Code. The EU’s Non-Financial Reporting Directive, which focuses on non-financial and diversity information, also requires large companies to report on a range of issues. These include statements on diversity, anti-bribery and anti-corruption, environmental issues, employee, social and human rights. “Risk reporting requirements have been on the rise and are only likely to increase further. This is a great opportunity for risk managers to broaden their role. It opens the door for risk managers to enter dialogue with other departments in the business, such as those in corporate social responsibility (CSR),” said John Ludlow, chief executive of Airmic. “What is your strategy for partnering with other parts of the business? My advice is to go around the other departments and ask: ‘How can we align our work? What is our business partnering agenda?’” he said. Speaking to media at Airmic’s conference this week, Mr Ludlow said many UK companies had yet to realise the significance of emerging risk reporting. This is a requirement that Airmic successfully lobbied the Financial Reporting Council to include in the revised UK governance code. The code requires listed companies to report their emerging risks alongside principle risks in their annual report and accounts. “Companies have not quite clocked that they will have to address emerging risks with the same gusto as principle risks. They need to encourage board discussion as this could require cultural and business models,” said Mr Ludlow. While emerging risk is included in the code, it is not defined and there is no official guidance on how companies should report these issues. However, in collaboration with Marsh, Airmic published a guide tackling emerging risk at its conference in Harrogate. It is not a guide on how to comply with the code but does provide practical guidance on emerging risk issues. Many of these reporting requirements have common threads, most notably increased accountability for businesses and a growing focus on CSR. “Risk reporting requirements often have a societal element because society is becoming a more powerful force and boards will have to pay more attention to their relationship with it,” said Mr Ludlow. “Society is an increasingly important stakeholder for businesses. Over time, boards have gone from a focus on shareholders to understanding the needs of wider stakeholders. This is an important transition that sees a shift away from a largely internal focus on return on equity, to how a business can gain the support of both shareholders and wider society,” he added. Airmic plans more work on CSR, according to Mr Ludlow. “It’s time to dial up the role of the risk manager in CSR,” he said. “Risk managers need to engage on risks to relationships with societal and other stakeholders, as they focus more on risks to reputation and corporate strategy. They should map out their stakeholders, including employees and business partners, but also those outside this inner circle, such as regulators, the media, non-government organisations and wider society,” said Mr Ludlow. “There is a need to engage more with society, and for risk and insurance managers to build bridges to corporate strategy, brand, HR, IT and CSR teams,” he continued. Speaking on a panel debate at the Airmic conference in Harrogate, Mr Ludlow advised risk managers to employ threat monitoring. This an approach developed by the security industry to monitor political risks. He believes risk managers can learn from the security sector and adapt threat monitoring to business and strategic risk.

Risk managers should grasp opportunity provided by risk reporting trend, says Airmic

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