Today’s ERM issues

The words risk management may be seen by some as a new 'buzz phrase', but  to risk management professionals who have been around for a long time, risk management is an important management discipline that contributes to better decision making. But beware, implementing an effective risk management strategy is not just a science, it is an art and you must be aware of some issues that may emerge.

What are the factors driving greater focus on ERM?

• Several high profile corporate failures linked to poor risk management and corporate governance.

• Unforgiving equity markets and stock exchange regulators crackdown on earnings management.

• Many local and global corporate governance initiatives introduced over recent years.

• New regulatory & accounting requirements continue to come into play.

• Credit rating agencies looking at risk management and corporate governance strategies.

• Financial and insurance markets are converging.

• Increasing requirement for manufacturing industry to become 'green'.

• Increasing directors & officers liability exposure resulting in higher insurance premiums.

How are these changes impacting today’s organisation?

• Regulatory changes placing greater responsibility on CEO/Board to carry out risk management and corporate governance duties effectively.

• Day to day risk management responsibility given to CFO or dedicated Chief Risk Officer.

• Some organisations are moving from a 'silo risk management' mentality to enterprise wide risk management.

• Many organisations are increasing their investment in risk management resources, external specialists and training.

• Companies increasingly recognising the value in risk management and are undertaking considerably more risk management related activities.

What are some the current emerging issues?

• Determining the appropriate level of risk management to cope with the risk management workload.

• Establishing a sound risk management framework and structures. 

• Attracting and recruiting the right people.

• Integrating risk management processes into business processes and strategy.

• Establishing a risk reporting framework that meets the needs of different stakeholders.

• Implementing risk management information systems that supports the risk management strategy.

What are the likely future issues?

• Managing the vicious cycle of risk management failure.

• The long term effectiveness of risk management in reducing the impact of poor management.

• Effectively aligning capital management/allocation to risk taking decisions.

• Risk management will be a core management capability/requirement.

• Risk management strategies to dovetail into the annual planning process.

• Greater reliance on advanced risk management information systems to support implementation of the risk management strategy.

What are the critical success factors to implementing an ERM framework?

• Integrating risk management principles into existing business processes.

• Alignment of risk management, compliance and internal audit functions.

• Continuing CEO, board and senior management involvement, visibility and commitment.

• Dedicated risk management function with appropriately trained and resourced personnel.

• Ongoing monitoring, evaluation and enhancement of risk management framework.