Page 18 - Risk Management Bulletin April -June 2021

RMAI BULLETIN APRIL TO JUNE 2021

a. Inconsistent Understanding of Risk : One risk is Talent Management Strategy: Get the right talent
classified into different risk types due to different which can leverage fast paced technology
risk taxonomies being used by departments advancements and align data analytics to implement
Nonsubmission of a report as per given timeline its strategies by taking risk-based decisions. In addition
of the regulator can be treated as regulatory risk to this find ways to reskill existing employees.
by compliance but Operational Risk department
may observe that it was technological failure that
led to the delay in reporting. Key Enablers of Effective Teaming: Certain key
enablers for an integrated team approach can be the
b. Ineffective Handling of Overlapping Risks: It is
tough to fix responsibility in case of overlapping following -
risks due to lack of clarity and such a situation a. Culture of Collaboration: Coordination is
hinders progress. For example, in case fair market understood as the primary means of managing
practices are not adopted while selling a product risk, rather than a secondary exercise performed
it will primarily involve operational risk team after functions have established separate
which will need to be supported by legal, ethics, processes. Accountability is shared across
compliance and HR teams. functions.

c. Ineffective Resource Allocation and use of b. Regular Formal Interaction: Regular meetings
Business Time: Due to lack of clarity and convened by risk functions to share knowledge
coordination, requests for information which may and enact cross-risk capabilities.
not be required are made to business units. All this
leads to multiple overlapping, inconsistent c. Knowledge Sharing: Sharing of knowledge and
communications, decrease in the efficiency of guiding the operating staff is one of the core
operations and friction between departments. responsibility of risk functions. Shared knowledge
includes best practices and ideas, lessons learned,
The Path Forward: information on emerging risks, regulator feedback, etc.
Build a Single Non-Financial Risk Taxonomy: d. Coordinated Strategy Development: Functions
The definitions and the nomenclature are aligned coordinate as a rule on controls and strategies to
across functions as a result of which the organisation manage multi-faceted risk. Other strategies
structure is driven by a common understanding of non- developed collectively may include: regulatory
financial risk and communication is enhanced across responses, approaches to emerging risks, etc.
teams. This increases efficiency and effectiveness.
e. Leveraging of Synergies: Risk functions actively
search for opportunities to collaborate on and share
Integrated Non-Financial Risks and Controls:
the burden of risk management. Redundant or
Helps organisations to put in key controls and an
appropriate testing procedure. Further, it also helps in unnecessary processes are identified and quickly
checking the proportionality of the control relative to eliminated. It enables organizations to overcome
the risk. It facilitates integrating the testing framework many of the drawbacks of a “silo” approach,
and formulating common risk dashboard, rating including limiting redundant work efforts and
systems, reporting templates, and escalation matrix. ensuring clear roles for accountabilities. Innovation
and solve non-financial risk management issues by
Develop Single Non-Financial Risk Data trying to effectively assess and implement the best
Repository and Reporting System: This will help ideas from organizations across the globe.
in the reporting to be consistent, which improves the
Thus, an integrated approach to non-financial risk
messaging and communication to management and
the Board and avoids dissemination of conflicting would link to the institution’s risk appetite framework,
messages. This facilitates collaboration across risk employ a comprehensive inventory of risks and
functions for processes such as incident reporting, loss relevant controls, use a consistent assessment
data collection for root cause analysis and improving approach, and offer the ability to provide feedback and
controls based on the lessons learned. enhance the process on an ongoing basis. T

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