Risk Management – A Holistic Approach
The economic crisis has had a profound effect upon the financial services industry and the wider ramifications are still unfolding. There has been much speculation around causation however some of the effects are plain to see; many of the organisations that were better placed to withstand the financial crisis had robust risk management infrastructures.
These were not outdated or silo-based solutions, instead the risk management infrastructures were holistic and infiltrated the entire organisation, be it governance, culture, quantitative practices or infrastructure. As such all firms are now required to review their risk infrastructure at the behest of regulators.
Risk Management – A New Take?
Enterprise Risk Management is not a new concept in the market however the differences in understanding and application are widespread. The new sanctions are not detailed enough to bring unity and with many concepts that are imposed the resistance to change will be strong. Perhaps there are other justifications for the increased focus on a holistic risk management view other than the whims of the regulators; one such example is the requirements of innovation:
“Review and adapt your Enterprise Risk Management(ERM) framework to address the incremental risks and uncertainties introduced by ﬁnancial innovation” – Rethinking Financial Innovation – World Economic Forum 2012
Risk Management – For What Use?
In our conversations around the marketplace we recognise that there is a shift in focus, immediate regulatory responses to the crisis are being managed towards BAU, instead an increasing importance is being placed in looking to the future. Risk Management has a greater function to play as an enhancement to business strategy, identify opportunities and creating long-term shareholder value. We believe this is part of the reason we are observing a new profile to those working in risk management, with a growing emphasis placed on ‘change management’ skills opposed to traditionally technical based profiles. I would be interested to understand your views on the matter, please feel free to email me.