Time to lose the gobbledygook – Africa

Risk management has a big role to play in South Africa as the public sector in particular grapples with the perennial problem of matching the ever-rising expectations of the people with limited resources in an increasingly tense political, social and economic environment. The challenge is made that much greater by the rising problem of corruption within the public sector that saps both resources and confidence of the public in the system. Dynamic risk management can be used to help tackle this scourge in South African public and private life that Transparency International recently highlighted in its annual report. But for risk management to play a full role in the fight against corruption and more broadly help ensure that maximum use of limited resources is made, individuals, from the top to the bottom of organisations, need to take responsibility for their actions and where necessary be held to account.hideThese were some of the key conclusions reached by a group of leading public sector South African risk managers who took part in a debate on risk tolerance and appetite at the IRMSA annual conference in Johannesburg last November. According to Peter Richer, Group Executive Strategy Risk and Segmentation of the South African Revenue Service, risk ‘gobbledygook’ is one of the biggest barriers to the active implementation of dynamic risk management. To ensure that CEOs and line managers buy in to the concept of risk management and truly appreciate its benefits the principles need to be kept simple and value must be shown quickly and easily, he said. The excessive use of jargon and perhaps even the existence of a distinct risk management profession may therefore be a problem in itself because it makes it all too easy for the ‘real’ managers of the business to delegate responsibility for risk management to someone else [the risk professional]. “Part of the problem may be having risk professionals because risk management is actually the responsibility of all the management of a company. Isn’t the board responsible for risk and core to running an enterprise? It’s important to set the tone from the top. But it’s dangerous to assume that governments are responsible for risk and so you don’t need to worry about it. Risk management needs to be brought to the core of the business. The CRO is the CEO,” said Mr Richer. He added that terms such as risk tolerance and risk appetite are ‘risk gobbledygook’ and can do the profession a lot of damage. He urged fellow risk managers to remain pragmatic. “Risk tolerance and appetite need to be flexible things. Organisations have limited capability and so you have to work out what applies. You cannot say South Africa has a higher or lower risk tolerance level, it is what capabilities you have. In an ideal world you would deal with all risks if you had the capability to deal with them all. But we don’t so you have to apply what you have. It is a question of building the capability of dealing with the risks, having identified what the risks are and what are the most important to deal with at that moment in time,” said Mr Richer. Bureaucracy is of course the enemy of innovation in many respects and no more so than in the public sector. Beulah Misrole, Chief Risk Officer - Enterprise Risk Management, Western Cape Government and formerly risk manager with leading private sector companies including Worley Parsons SA, Anglo Platinum and Babcock Africa, certainly thinks so. “I would say that the present problems for business are largely based in bureaucracy and process. People can lose steam in this process,” she said. Beerson Baboojee, Risk Manager at National Treasury, agreed that bureaucracy can be a serious impediment to dynamic risk management and can push the discipline towards a more tick-box, compliance-style function than it should be. “Bureaucracy is necessary but if it’s excessive it needs to be done away with. We work in a regulated environment which is itself a form of risk management. If it is carried out the way it should be you should not have problems. But if I want to appoint someone to the risk management department I need six signatures. That is kind of counter-productive and I think that sometimes we shroud things in bureaucracy because we don’t want to be held accountable.” Mr Richer said that bureaucracy is the ‘antithesis’ of risk management and should only be applied when really necessary. “You have to ask: ‘What is our tolerance for risk, what capacity do I have to apply and allow the activity to go through?’ You have to prioritise that. The gatekeeper approach makes sense but you cannot prevent everything,” he said. Ethics and culture were big themes at the IRMSA annual conference and the risk managers in this debate all agreed that the establishment of a strong risk culture based on trust is critical to help overcome big problems such as corruption. “Is bureaucracy helping to solve corruption? Building an approach that trains the right people, a culture in an organisation is critical,” pointed out Mr Richer, referring to how the latest version of the King corporate governance code—King III—attempts to address this question. Ms Misrole commented that the question of culture in risk management can appear ‘insignificant’ and distant when presented with very real and pressing problems such as violent strikes. But she pointed out that such problems are often caused by the absence of a good culture in the first place and so it must take top priority. “The greatest thing to overcome is the culture of the job title,” she added, pointing out how individuals, particularly in the public sector, can hide behind their job titles to avoid responsibility and accountability. Mr Babojee said that forceful action must be taken to establish the right culture and weed out the wrong culture. “There are two separate points on culture. First you have people within the organisation who you try to mould through workshops and training and the like. You have to make sure that there is a prudent process when you are training people. Second, you need to deal with people who work against the culture. Certain groups seem to do whatever they want and whenever they want and when they get away with it others do. Too many people get away with it. To change a culture problem you need to get performance up to speed, link it to individual performance and make people accountable. For this you need leadership from the very top.”

Time to lose the gobbledygook – Africa

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