At the heart of any entrepreneurial venture is the basic relationship between risk and reward. And while any successful business has at its helm minds that have managed risks, differences in the maturity of risk functions across different enterprises abound.
Although the more risk-mature models manage risks efficiently and effectively, today’s organisations need to reimagine risk management so that it becomes a value creator in its own right.
The risk landscape facing our businesses is indeed a rich one. Key risk areas include cybersecurity, sustainable finance, regulation, people, operational resilience, fraud and financial crime and third party management, to name but a few of the risks currently consuming most of the Three Lines of Defence’s bandwidth within organisations. Added to these, other risk areas which have been there for years and continue to require attention must not be neglected: credit, liquidity, corporate governance.
Today’s chief risk officer must keep tabs with a growing list of risks: some of which will be increasing in importance, others that are more stable and others yet that are becoming less relevant with the passage of time. And while the ‘back-of-the-envelope’ risk list set out above will apply to different sectors in varying ways, the implication is inevitable – the risk function has a crucial role in helping the business navigate through its risks.
In all this, risk management is typically structurally separated from front-line decision-making. Often risk functions are reactive and deemed by business decision-makers as those that “put the breaks” on business. While some organisations manage to bridge this divide when making the initial investment decisions, fewer manage to keep this strong partnership bond between First and Second Line for ongoing risk (and compliance) processes. This is certainly not the optimal use of the resources emp ..
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