Decision making at times of uncertainty will be challenging for any board but their risk committee can play an important role to support them. In the previous two blogs in this series, Hanif Barma drew on a recent Risk Committee Chairs Forum (RCCF) roundtable, hosted by the Risk Coalition, identifying practical steps the risk committee could take. In this third and final blog of the series, he considers his four final learning points. These concern getting the balance of the committee’s focus right, allowing enough time, staying informed outside meetings and - of course - not forgetting the importance of culture.
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Making decisions in times of uncertainty (part 2)
What can a risk committee do to help its board make better decisions, especially in the uncertain times we find ourselves in. Drawing on a recent Risk Committee Chairs Forum (RCCF) roundtable, hosted by the Risk Coalition, the discussion focused on what a risk committee should practically do to support its board. Building on his last blog for the Risk Coalition, Hanif Barma considers three further learning points in this blog. These concern risk spotting, use of scenarios and tne importance of avoiding getting distracted.
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Making decisions in times of uncertainty (part 1)
Making good decisions is difficult at the best of times. In today’s environment more than ever, boards are finding effective decision making with a high level of confidence trickier than ever. Drawing on a recent Risk Committee Chairs Forum (RCCF) roundtable, hosted by the Risk Coalition, the discussion focused on what a risk committee should practically do to support its board. Hanif Barma considers the first three (of ten) learning points in this blog: the role of the risk committee, the importance of purpose, and the need for data and information.
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Is measuring the wrong things a risk?
Measures drive behaviours, argues Alison Bond, so it is essential that the all of an organisation’s measures are aligned and on course, asking for the right action for the right reason. Importantly, it is not just profit that needs to be measured - less tangible matters such as reputation and human capital need to be too, but these get too often put into the “too tricky to measure” category. She explains that these things are easier to measure than people think.
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Risk 2.0: Rebooting for Modern Risk Management (part 2)
As the modern risk team looks at a much wider range of risks than the traditional financial and operational risks, both within the firm’s perimeter and beyond, it needs to change the way it works and it needs to adopt a new mindset, according to Keith Davies. The CRO’s new challenges are to provide greater foresight, be more commercial, have greater focus on resilience and to embrace new tools that are available to better equip the risk team in undertaking its work. He considers these matters in this blog.
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Risk 2.0: Rebooting for Modern Risk Management (part 1)
With the geopolitical, macro and technology environments all changing at an accelerating rate, and stakeholder capitalism raising the importance of firms’ social licence to operate, Keith Davies explains that Risk teams now need to manage a raft of emerging, complex, and inter-connected tangible and intangible risks. This means that they need to change the way they work, all underpinned by a change in mindset.
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Moving from ESG theory to practice – making the transition
Transitioning from ESG theory to practice from a risk governance perspective is not an easy task. The Risk Coalition’s Risk Officers Sustainability Forum discussed the challenges at its most recent forum. Summarising the discussion, Alex Duncan highlights that the alignment with business strategy is the key building block for establishing fit-for-purpose ESG governance. Risks need to be considered from both an ‘inside-out and outside-in’ perspective and the CRO needs to be aware of the risks in producing and challenging transition plans to achieve net-zero targets. In the final analysis, a ‘do nothing’ approach or strategy is not viable.
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Effective risk oversight: why culture matters
Risk and culture pervade all aspects of an organisation’s operations and strategy, argues Bryan Foss. In a panel discussion on Transpire Global’s Risk Faculty webinar, he considers the key connections and crossovers between risk and culture which are too often kept in silos. Key considerations in relation to the intersection of risk and culture include recent regulatory developments relating to culture, the need to create a physiologically safe work environment, and the increasing focus on the people and culture dimensions of cyber and technological risk.
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Does culture influence risk?
Often, getting traction behind culture change that supports the management of risk and, in particular, initiatives that encourage people to ‘speak up’ can be difficult. And, with inflation now a real threat to businesses, there is now a risk that culture drops to the bottom of boardroom agendas. Alex Walker, argues that the challenging environment is a great opportunity to bring people together, aligned behind a clear purpose and strategy. She says that there are two crucial elements to ensuring your team are both able to spot potential risks quickly and feel safe enough within the organisation to speak up.
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25 lessons from working with Audit Committees for 25 years
It has been 25 years since Tom McLeod appeared before his first Audit Committee. He reminisces about his experiences during this time, sharing his insights and learnings. These make for a check list of things to do (or, in some cases, not to do) which will be an invaluable aide-memoire for any Chief Internal Auditor who is preparing for their next Audit Committee meeting. (These are good tips for a Chief Risk Officer preparing for their next Risk Committee meeting too!)
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A big risk is in the hands of the Chair
The diversity of a board increases its ability to spot opportunities and get on top of risk, says Michele Gorgodian. In these volatile times, this diversity is all the more important. Chairs of boards have a key role to play in board composition and selection, and there are evident risks involved in appointing new board members through personal contact - surprisingly, this remains prevalent according to recent research. The left-field thinking which diversity brings, therefore, is essential to allow boards to grasp complex risks beyond traditional patterns and dependencies.
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Taking risk seriously
Nicolina Andall confesses that ‘risk’ can actually be an engaging and enjoyable topic of discussion! In this Risk Coalition blog, she draws on a recent discussion at a Women on Boards UK webinar and panel discussion, and emphasises that the approach an organisation takes to risk management and oversight needs to be bespoke and it must focus on the long-term sustainability of the business.
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Internal audit and risk functions must collaborate to champion a healthy culture
Corporate culture is not just a risk in its own right, but it has a significant impact on a broad range of other risks, and vice versa with other key risks having a big impact on the corporate culture, argues Gavin Hayes. He draws on the findings of the latest report from the Chartered Institute of Internal Auditors, ‘Cultivating a healthy corporate culture’ and calls for internal audit, audit committees, and boards all to step up regarding their organisation’s culture - and for risk management and internal audit to ensure there is a joined-up approach to identifying, managing, and mitigating culture-related risk.
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The Ukraine crisis and the role of risk committees
The Risk Coalition’s Risk Committee Chairs Forum met last week for a roundtable to discuss the implications for risk committees of the Russian invasion of Ukraine and, more broadly, the challenges of governing their organisations in the uncertain times of a global crisis situation. In this blog, Hanif Barma discusses the three key themes emerging from the discussion: rethinking scenario planning, ensuring a continuous conversation with stakeholders and looking beyond short-term time horizons.
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Would risk committees benefit from spending more time focused on emerging risks?
The recent inaugural Risk Committee Chairs Forum (RCCF) hosted by the Risk Coalition saw 17 experienced risk committee chairs participate in a roundtable to discuss some of the challenges their committees face around emerging risks. These issues relate to: (i) ensuring their risk committee has the right focus, (ii) challenging the way things are done by their risk committees and (iii) making sure their risk committee members bring the right approach and mindset. Hanif Barma discusses some of the best practices and practical ideas raised at the RCCF.
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Are young people increasing the risk profiles of banks?
There is no doubt that young people are interacting with banks, pension funds and other financial service providers very differently from the way that previous generations did. Most obviously, they are interacting digitally and see little point in time-consuming face-to-face contact. We are also seeing a landscape in which customers interact with a variety of financial institutions, and switch between them more frequently than in the past. These changes may well lead to new and emerging risks, but Andrew Cunningham argues that the real threat that young people present to financial institutions lies in the increased financial vulnerability of young people themselves.
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Sustainability: risk management and the balance of trade-offs
In fulfilling their responsibilities, chief risk officers need to balance the seemingly conflicting priorities of fiduciary duty to investors, conduct towards our customers and expectations of other stakeholders in a way that both moves the sustainability agenda forward and protects their companies from other risks over the short and longer term. Alex Duncan summarises the key discussion points from the Risk Officers Sustainability Forum recent discussion on 20 January which was held under the Chatham House Rule. He highlights that chief risk officers need to establish strong leadership positions within their firms to help their colleagues and their Boards navigate the dilemmas and moral challenges of sustainability agenda.
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Geopolitics, corporate governance and ESG
Events unfolding in Ukraine illustrate an increasingly dynamic and ‘competitive’ global geopolitical environment. Company boards and management teams often pay insufficient attention to geopolitical issues and their second- and third-order effects, at best only drawing on occasional board-level briefing with limited further analysis and action. Current tensions globally show that boards need to give greater focus to the increasingly uncertain impacts that impact undermining macroeconomic and investment conditions. Derek Leatherdale and Hanif Barma highlight some key areas that boards should focus on.
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People risk: two key focus areas in an evolving risk landscape
As the risk landscape continues to evolve and present new challenges, it is clear that one area of risk stands out – People Risk. Frank Brown explains that it is often the actions or inactions of people which have been at the root cause of the issues that have materialised. He adds that these risks will be exacerbated in 2022 by two main factors – staff shortages caused by ‘The Great Resignation’, and by the challenges associated with the continuation of hybrid working.
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Oversight of purpose - how to set up governance over ESG
Establishing clear oversight arrangements over ESG matters is not purely a matter of good governance and corporate hygiene, according to Alex Hindson. Rather, he explains that it is an enabler of better decision making by ensuring ESG is integrated into an organisation’s existing decision-making frameworks. A key question, therefore, is whether to establish a new, stand-alone committee at board-level to oversee ESG matters, or to work through the existing committee structures.
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