6 tips to strengthen your organisation’s risk management

 

On December 15^th 2014, our small unassuming office building suddenly came under threat, threat of entirely unexpected type.

We turned on our computers and became glued to the social media live updates, Youtube clips and news pieces flooding our screens…

Our office was by Martin Place. The threat was terrorism.

Risks to your business can exist anywhere and it can be hard to predict when and in what form they will occur.

Mitigating risk is a vital part of any business, and planning for risks well in advance is often the most effective way to do this.

Hear 6 hot tips from our 3rd Annual Australian Risk Management Summit speakers on how to strengthen your risk management strategy

Bettina McMahon
Head of Risk and Assurance
National E-Health Transition Authority (NEHTA)

 

  1. Risk management isn’t a ‘framework’
 

Innovative organisations don’t view risk management as a ‘framework’, but as lens on what level of risk they need to take to deliver their strategic objectives. The output isn’t a risk register, it’s an increased appetite to take calculated risks and manage potential consequences.

2.   Every management decision is underpinned by an understanding of ‘acceptable’ risk

Formally defining a risk appetite embeds risk taking into corporate culture. It articulates the level of risk we’re comfortable taking, and aligns everyone’s risk tolerance. The right level of risk taking then becomes part of the organisation’s DNA.

3.   Risk controls span more parts of the organisation than you think

Risks are managed by a management plan (we’re all familiar with this) but also a range of other controls; corporate structure, resource allocation, legal contracts, insurance, and cash reserves. Seeing controls holistically gives an executive comfort that a risky decision is moderated on many levels.

 

 

Tony Pooley
Associate Professor Risk Management
University of South Australia

 

4.  Set the expectations from the very top. 

If the Audit and Risk Committee of the Board don't specify how they want to see risk reported to them, how can they effectively overview the health of the business?   For example, do the Board want risk reported by value chain components or by region, on qualitative heat maps or quantified bar charts, with Social and Financial risks assessed in a common manner or differently?  Should risks above a certain consequence level be assessed differently to other risks? etc.

 

5. Define how you are going to demonstrate cost/benefit in detail if you are using qualitative risk assessment. 

For example, many risk guidance documents behind qualitative assessments use factor of 5 or 10 for likelihood steps which means the risk may have to be cut by 80 or 90% to drop down a level - and not many risk treatment plans can come close to achieving this so there is little point in measuring benefit in terms of changing the qualitative rating.  Failure to tackle this tricky task for the organisation leads to entirely subjective decisions, usually resulting in waste and sometimes in disaster.

 

6.  Consider two levels of risk assessment

One for the majority of risks but a more in depth methodology for high consequence events and for events that exceed a pre-set level of risk rating from the lower level of assessment.  Its a simple fit-for-purpose situation where using too light a methodology for everything will cause you to miss important weaknesses and too heavy will consume excessive resources for little additional reward.

 

From a young age Luana wanted to become a teacher. She would line up her teddies in a row and teach them for hours on end. However, she eventually grew tired of their nonchalance and has ended up leading a team of producers instead- which she finds far more fulfilling and stimulating!  

Luana comes from an experienced production and management background. She has produced and topic generated events across Asia and Australia.

Luana enjoys learning about emerging trends and drivers for change and loves the notion of the 'butterfly effect'- that change can start small but grow immeasurably through a ripple effect.