UK: The Risk Agenda

Last Updated: 20 March 2017
Article by ICSA  

Collaboration within organisations will create a united and diverse resource to help boards deal with risk

Risk management is moving up the corporate agenda. It is now viewed as more than a tick-box compliance exercise, and regulatory bodies such as the FRC are increasingly calling on business leaders and senior management to have a greater involvement in their organisation's risk management strategy.

But how do boards actually view risk management? Do they see it as a necessary evil or as a vital contributor to the successful development and execution of their business strategy? Managing risk in today's complex world is no easy task and boards are having to respond to growing pressure to take an active role in shaping their agenda and conversation on risk.

Airmic has spent the past year asking UK boards about risk, through a series of round table meetings hosted with the Chairman's Forum, the Chartered Institute of Management Accountants and Alvarez & Marsal. The answers to these questions were not only fascinating, but extremely encouraging.

"It is imperative that risk management is driven from the very top of the company"

To sum it up, today's boards care about risk management – and not just about paying lip service to it, but actually getting it right. That dozens of FTSE chairmen, CEOs and non-executive directors, were both willing and keen to have these discussions speaks volumes in itself. To quote the Director of the Chairman's Forum, Richard Sermon: 'Boards now want a more qualitative conversation about risk.'

The outcome of these discussions culminated in our report entitled 'Ensuring corporate viability in an uncertain world – framing the board conversation on risk'. The report shares some practical thinking on the key issues and offers an agenda and road map for senior executives on how to have an effective board risk conversation.

The report includes commentary from senior business leaders, including Sir Peter Gershon, Chairman of National Grid and Tate & Lyle, Sir Roger Carr, Chairman of BAE Systems, and Sir Win Bischoff, Chairman of the FRC.

Global complexity

One of the core messages that came out of the discussions is that boards are concerned about the growing complexity of global risks. Managing risk is clearly not a new concept for businesses, but what is new is that the scale of the challenge is dramatically more profound than in the past. Broadly speaking, this is due to three factors:

  • Speed of change, of markets, environments, distribution and geography. The rate of acceleration requires a speed of response which is greater than anything previously experienced.
  • Complexity of risk, of business models, of technology dependence, and of the external environment, beyond anything seen before.
  • Transparency, whether planned or otherwise, occasioned by social media, traditional media, and the pervading investigative process – we all live in a glass bubble.

Risk profiles are changing. When creating lists of risks that typically keep business leaders awake at night, intangible risks which are harder to define, quantify and manage, such as cyber, reputational and non-physical business interruption, feature more prominently than the tangible or more physical asset-rich risks.

Add to this the potential for digital, non-physical triggers to cause physical damage and the potential for substantial physical damage is vast.

Risks will continue to become more complex and interconnected, and change will continue at an unprecedented pace. Boards are acutely aware that sound risk management is becoming vital in this context.

According to Robert Walker, Chairman of Travis Perkins and Enterprise Inns: 'In an interconnected world there is an increasing need for boards to understand and seek to manage "complexity risk" by factoring in a combination of risks, including the impact of global economic and geopolitical trends and issues, cyber security and the potential impact of reputational risk.'

Not just compliance

Given this backdrop, it is imperative that risk management is driven from the very top of the company. Encouragingly, the interviews that took place prior to writing the report, demonstrated real progress in this area and illustrated that senior management understands the importance of board-level leadership for the management of risk.

The report reminds boards of the need to ensure that the organisation's approach to risk has been properly considered when setting strategy. It states that risk management should support better decision-making, rather than inhibit sensible risk-taking in line with growth strategies and operations.

It also emphasises that the board's responsibility for the organisation's culture is essential to the way in which risk is considered and addressed.

There was clear recognition that although risk managers have day-to-day responsibility for implementing the risk management system and providing help and support, it is up to senior management to ensure that the appropriate system is in place to support the effective integration of risk management and to foster collaboration in the management of risk, vertically and horizontally around the organisation.

For this to happen successfully, the risk management system should comprise a series of principles, frameworks and processes which must be embedded in all parts of the business model. The system needs to be dynamic and adaptable to respond to rapidly changing circumstances.

To quote Charles Tilley, Executive Chairman of the CGMA Research Foundation, who participated in the research for the report: 'Every aspect of the business has a risk management element; every decision made or action taken can be viewed as risk prevention or risk mitigation. For companies to have success over the long term, risk management should be integrated into the fabric of every business.'

Material impact

One of the most positive messages that rings clear throughout the report is that when risk management is elevated to a strategic level it opens up opportunities for value creation. In other words, good risk management is not just about 'saying no' or 'business prevention', but can have a material and positive impact on long-term resilience, competitiveness and value creation.

Managing risk, resilience and longer-term viability are inherently linked. Longer-term viability requires a good understanding of the risks facing the organisation, how they are being managed, and how the company would respond if they materialise. Resilience is the ability of an organisation to anticipate, prepare for, respond and adapt, to change and sudden disruptions in order to survive and prosper.

An integrated approach

The fact that risk management has a growing status within organisations has been backed up by surveys conducted by Airmic of its membership, which show that risk managers now find it easier to gain attention from the top. Respondents also reported greater support and leadership from the board on risk issues.

This remains work-in-progress, but it is clear that boards increasingly appreciate the value of risk management. But while the message is getting through to the top, research indicates that more is needed to embed risk management across organisations.

"When risk management is elevated to a strategic level it opens up opportunities for value creation"

In the same survey of Airmic members, almost three-quarters of respondents said they were concerned that risk management and risk education are not being fully integrated with wider business units.

Although different sectors approach enterprise risk management in different ways, one thing is common: all activities of an organisation involve risk. Successful enterprise risk management requires an integrated approach.

It is not possible for the risk function or senior management alone to be effective at identifying and assessing risks, and in particular identifying aggregations of risk across a business. As business models continue to become more complex, risk no longer falls into neat categories along organisational lines.

Take digital risk as an example. As the digital revolution penetrates all aspects of a business, so digital risk becomes a component of all risks in all areas of business. The only way to manage this is for departments to work together – digital risk is the biggest concern for most CEOs and managing it cannot be confined to the boardroom, the IT department or the risk management department.

Building relationships

Breaking down silos, however, can be a challenge – it requires a cultural shift for IT and risk departments to work together. Business function leaders have the potential to become influential business leaders if they are smart about building relationships with their peers, hire the right teams and build the right capabilities. Different functions typically have different profiles and these need to be understood to build sustainable, collaborative relationships.

Although boards play a vital part in promoting collaboration between functions, company secretaries also have an important role in meeting this challenge.

Managing risk is an important part of a company secretary's role and, as the key link between the board and other functions, they – together with their colleagues in risk management – can play a pivotal role integrating the management of risk across a business.

There are enormous demands placed on boards and, for many senior executives, finding adequate time to focus on risk management can be a challenge. One of the messages that rang clear from our conversations with boards is that senior management is looking for help on how to translate the risk management imperative into practice.

Collaboration across management and teams in an organisation not only produces collective intelligence but can create a united, diverse resource for boards to call upon.

Julia Graham is Deputy CEO at Airmic

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions