The Case for Improved Risk Management
Has the time has come for an improved approach to Risk Management? A need for an approach that reflects the current realities of the business environment. Many businesses are undertaking a reset post Covid and other market drivers. Tougher governance and ‘people’ related risks are driving many to review their risk profile. Going beyond ‘ticking the box’ and becoming more proactive is a priority. This is what our clients are telling us.
Traditional risk management approaches often do not consider factors such as cognitive bias. Neither do they account for the “collective lens” on risk. The tendency for an organisation to become insular with its risk identification is real. Expanding the risk horizon beyond the traditional lens is key. Seeking alignment on the key focus of business risks is a critical step. Many underestimate the impact of culture and people risks to the value of their business. This approach provides an opportunity to explore risk appetite, a conversation often overlooked. Good risk management should look at the upside of risk not only the downside!
Other risks that are also causing organisations to review management capability. These include Diversity, Environmental Sustainability and Social Justice. Current structures are not well positioned to cope with these current risk challenges. Staff attraction and retention issues are increasing where these areas are not managed. More accurately, leadership and values are exposed if they are not authentic and experienced every day.
These factors are exposing gaps between those changing their risk approach and those who are not. Best practice now includes people and cultural dimensions of risk management, giving a greater weight to the expertise and partnership required to these risks is key.
The People and Cultural Sides of Risk
People and cultural aspects of risk management has surfaced as critical in a more holistic approach to risk. Considering all aspects of change and transformation when developing an approach to risk, inputs from all your organisation far beyond risk experts is required. ACN recommends expanding to investors, and even local communities. The broader the community you include in consideration of risk, the better prospective you create.
The Expertise and Partnership Required to Address Risk
Finding the right partner or experienced guide to the development of a new risk process is not easy. An experienced partner will support the development and implementation of your new risk process. They will also put in place the reinforcing mechanisms that ensure the ongoing practice of the new process.
Your partner will help to facilitate the organisation through the tough conversations required. Support Governance, Process, and Implementation. Ideally, they will have a solid platform and be able to build risk skills in your organisation.
They will be a good mentor and coach in a way that is flexible to your business’ needs. This will lead to you Managing the intersection of the new risk approach and the business’ overall strategic plan. The right partner will acknowledge the organisation is already on the road toward addressing their risks. A collaborative approach will always be a great fit for your business in the risk arena.
Added Value of Risk Management with ACN
A good risk process reveals all critical vulnerabilities. Provocative questions that uncover ‘what’s so’ can reveal hidden dimensions to risk. It is a good investment in time and effort!
The process should look at a complete set of stakeholders and identify localised risks as well as enterprise risks. Alignment on the level of risks/risk perspectives will provide a set of risk priorities and point to the effectiveness of controls. Once the data is entered into the Risk platform, project managing actions to ensure risk tolerance becomes easier. Also, increased visibility gives clear line of sight for Governance teams. You are well on your way to better Risk outcomes already.
Dynamic Leadership Approach
ACN has focused on developing a dynamic leadership approach. To identify and address clarity for the tree levels of good risk management practice. Navigating the interface between risk and the concerned stakeholders is a design goal of the ACN approach.
Their approach is weighed in the direction of the relationships critical for a successful risk process. Risk, industry, and human behaviour experts that can best outline and design the process for your organisation. In its work with clients, ACN has identified a consistent pattern that works for managing and optimising risks.
Twelve points to consider when Optimising Risk
ACN’s approach identifies the three primary focal areas for designing an effective risk approach. Those focal areas reflect critical transformational and include new changes in dynamic leadership. Add supportive technologies, and process design and you have a winning approach.
Dynamic Leadership. Defining what dynamic leadership means for your organisation is essential. This will enable the development of a vibrant and refreshed risk process.
Characteristics of dynamic leadership are
- accountability within the organisation
- a consistent and sustainable implementation plan
- a method and inputs from the Boardroom
addressing leadership’s maturity on risk.
Here are the top 12 factors ACN use to optimise risk.
- There should be a distributed accountability for risk including the development of a set of critical perspectives on risks, a localised functional view of risk, a cross organisational view of risk, and an integrated view of risk.
- A consistent and sustainable implementation of the risk process across the organisation, often inclusive of suppliers, is critical in the face of risk challenges.
- It is critical that there is visibility of and interaction with the Board, developing and discussing the true picture of risk for the organisation and the required quality of risk management and oversight.
- Consideration of the level of leadership maturity in relationship to business continuity and management of risk must be factored into the process with a willingness to confront, consider, and adjust to ongoing new entrants in the risk landscape.
- Supportive Technologies. Using the right set of technologies that support and reinforce the designed changes to the risk process is critical. The technologies include software, measurement, and reporting of progress against the newly designed risk process. Bespoke Support Software to track and monitor risks, the business context impacts, and changes in risk levels enable management in a complex setting. Software that readily interfaces with existing information systems, particularly at the scoreboard level, allows the risks to be managed appropriately at the multiple spots in the organisation.
- Measuring the right things as defined in the newly design risk process allows for tracking and reporting advancements at all levels, from external stakeholders to employees to investors.
- Productive reporting of environmental, social, or other incidents in a way that they can be permanently addressed in an honest and reflective manner allows for ongoing improvements to the risk and related processes.
- Process design. An optimised process design is the outcome of the engagement and relationship method undertaken to define the new risk process for the organisation. This risk process must include a set of inputs, from the culture of risk management, selections in the spectrum of risk tolerance, considerations beyond mitigations, and the allowance and consideration of unplanned work.
- The culture of risk management defined at all levels offers the conscious and considerate prioritization of risks. It also clearly connects each member of the organization to risk and its relationship to work within the business.
- A clearly identified and articulated choice to operate within a limited spectrum of risk tolerance serves the organisation in its day-to-day operations. The entirety of the business knowing its boundaries in risk decision-making facilitates critical activities.
- Moving the organisation’s thinking beyond risk mitigation as the primary solution to address risks allows the business to reconsider key decisions, strategic plans, and significant partners.
- Recognising the dynamism of risk as related to unplanned or unpredictable work and having procedures to address the spontaneous work requirements is, in and of itself, a risk management technique.