The changing face of risk management
As a relatively new discipline, risk management continues to be a constantly researched subject matter – with many experts doing their best to reflect on its effectiveness and predict its future, especially during this era of economic turmoil. One such attempt has been by Steve Culp, senior managing director of Accenture Finance & Risk Services.
Based in London, Culp has more than 20 years of global experience, working with clients to define strategy and execute change programmes across a broad spectrum of risk management and finance disciplines. He outlines eight business and technology trends that shape risk management:
Entrenchment of a good risk culture: A number of organisations are beginning to provide internal training for staff on risk management, and discussions are aimed at ensuring that all employees understand their role in managing risk within the organisation.
Risk processes that expect more complexities in the marketplace: Companies need risk management capabilities to support scenario planning and risk mitigation, and they need information based on more than just a finance or process perspective. They need to be able to look at different markets, customers and product lines in a more sophisticated manner.
A more global shift (non area-specific processes): Risk management best practice is no longer concentrated in the usual regional centres. With moves into new and unchartered territories, the risk discipline has to deal with factors around new cultures in the new markets and a workforce that is linked only through technology.
The challenge is ensuring consistency around the risk process and entrenching risk buy-in in areas that are different in terms of doing business, have different market conditions and that have different maturity levels, when it comes to risk management.
Technology: There is a need to integrate, align and harness technologies in a way that will better serve the business and deliver the outputs and insights required to outpace the competition. This is not only true for the risk management aspect of an organisation, but every aspect of business, from product development to customer services.
Better alignment between the roles of chief risk officer and chief financial officer: The increasing levels of investment and focus on risk management puts more pressure on risk officers to demonstrate the benefits of the process, by linking the outcomes from risk management processes more directly to business outcomes and tangible cost reductions.
Fostering better partnerships internally and externally: Many organisations are more actively seeking collaboration with the risk function and distinct measurements of the risk roles in new projects and day-to-day business. Through a sometimes “forced” collaboration, companies attempt to ensure a clear and measureable risk process in which everyone is involved.
A risk-orientated strategy for the changing regulatory environment: Across the globe, there has been a change in “regulatory waves” as a result of the recent tough economic conditions. The new trend is to implement an integrated risk management framework more suited to meeting strategic business needs, while taking into account an ever-changing regulatory environment.
Harmonisation and linking of operational processes to the bigger role of risk: Process issues (that usually have a small degree of risk) have clear risk assessment criteria to ensure that, ultimately, they do not snowball and create risks at a later stage.