Historically firms have adopted a silo approach toward risk management. It is exciting and encouraging to see the recent growth in Enterprise Risk Management practice across businesses globally. The world’s major organizations are now implementing ERM programs. We encourage our clients to implement Enterprise Risk Management programs. Aiming high now, will give your firm a real strategic advantage in the future.
It has become difficult to draw a line between corporate governance and risk management. It is critical to focus on the following:
Important to regularly perform a detailed assessment of tools, analytics and skills:
Identify, report and action the risk factors that an organization faces. Use sophisticated qualitative and quantitative tools to encourage clients to take risk into consideration when making business decisions.
Decompose investment risk into market, credit and liquidity risks. Market risk is the risk that changes in market prices will reduce security value. Credit risk is the risk that shift in credit quality will reduce security value. Liquidity risk can arise due to failure to secure necessary funding or failure to execute a transaction at the current market price due to limited market participants
Those risks arising from the execution of a company’s business functions – potential losses due to external events, management failure, inadequate controls, human error, fraud and system failure
The risk associated with future business plans and strategies, including plans for entering new business lines, expanding existing services through mergers and acquisitions, enhancing infrastructure.
The potential for loss to an organisation’s reputational capital. Reputation risk has reached headlines frequently in recent years following numerous cases of high profile scandals and frauds. Reputation risk can be highly destructive to shareholder value.
Many firms have been seriously compromised in recent years due to elementary and avoidable structural failures.