Page 25 - BF Cover February 2019

ARTICLE

were developed more from a point of view of giving shareholders around the globe, strength of human resources, past trends of
comfort rather than any active risk management. Then came un-favourable circumstances, etc.
an era of regulatory driven risk management which basically
meant corporates had to comply with a plethora of regulations, In order to set up such a risk management function,
failing which hefty penalties were levied besides legal charges the following should be considered in detail:
which could derail an organisation's growth strategy. This
suddenly drew huge attention as no management wanted to 1. Dynamism in organisational culture - Organisation culture
cross the line with the regulator. Compliance departments were comprises of the work force who belong to different cultures,
societies, races, castes, etc. A strongly embraced multi-cultural
set up and manpower deployed to keep a check on any
regulatory changes impacting their business and the risks work force can support in managing the ever-changing risk
environment; the right mix of millennial, generation X, etc. can
perceived thereof.
further add to innovation, stability, analytical mindset and
creativity
Cybersecurity risk and reputational risk are the latest entrants
to the complex web of risks. Further, with very limited tools and
resources available to quantify the amount of damage these risk 2. Rethinking and reassessing the risk appetite of
can cause, they have quickly become the topmost agenda of any organisations - Realigning the existing risk appetite with the risk
boardroom discussion. Technology adoption is inevitable for any appetite of a diversified risk environment. Risk managers should
company to grow, however, if not adopted in a measured way, rethink, reassess, and re-apply their strategy on risk mitigation
architecture applied at various levels of the organisation.
technology opens the doors to IT and cyber-security risks. On one
Strategy must consider business strategy, digital strategy, human
hand, concepts such as machine learning, internet of things and
artificial intelligence are helping risk managers perform their resource strategy, investment strategy and other factors
tasks with efficiency and on the other, the growing use of these affecting the organisation
concepts in the financial sector has led to many frauds.
3. Continuous review - For any strategy to work, there has
to be a continuous monitoring and review of the actual state of
The world of risks is growing more and more complex and
intertwined. Whether it's a political change in a country, affairs with what was expected, to understand how things are
commodity demand - supply concerns, or an unpredictable/ to be modified for better management
unfavorable central bank policy, each of these has made the job
4. Right mix of technique - For any risk management strategy
of risk managers challenging and demanding, and therefore, the
to work, there has to be the right mix of risk management
response from corporates has also been resilient with corporates
overhauling their risk management processes. We now see techniques covering all risk types. Techniques can be dependent
on various factors such as organisation size, industry in which it
separate departments being carved out, each responsible for
identifying, monitoring and managing of risk, investments being operates, its presence around the globe, strength of human
made in people, processes and technology and elevation of the resources, etc.
role of the Chief Risk Officer (CRO).
Following are some important pointers that should
Risk mitigating measures have to be commensurate with the be considered while selecting any particular risk
organisation size, the industry in which it operates, its presence technique:
♦ Analysing the scenarios - What can go wrong that
may lead to any unfavorable impact
♦ Quantification of failure - What would be the
probability of a particular failure to happen
♦ Assessing the impact (stress) - If it happens, what
consequences are expected.

The risk management framework is an important aspect at the
centre of our entire discussion. Following are the steps for

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