Tag: Risk

Redefining Risk

risk

Maybe we should define risk as what needs to go right, instead of what could go wrong.

Although I would like to claim credit for this view of risk, it came from James Bone of Global Compliance Advisors, LLC. I met James at a Compliance Week round table last week discussing risk management and regulatory developments for the financial services industry.

By changing the definition, you are now looking at risk through the operations of your company and its business plan. You are no longer the doomsayer, worrying about the myriad of things that could go wrong, some of which are likely to highly unlikely. You are now focusing on implementing your company’s business plan.

Compliance and risk professionals need to keep an eye on what may go wrong. But, as James points out, it is just as important to make sure things are going right.

Image is by anarchosyn: RISK AWR WC T7L LosAngeles Graffiti Art
http://www.flickr.com/photos/24293932@N00/ / CC BY-SA 2.0

Making Smarter Risk Decisions

PriceWaterhouseCoopers published Making Smarter Risk Decisions.

The paper looks at how the most successful organisations define their risk appetite and integrate this appetite into business strategy and culture so that all facets of the business consistently apply the desired risk thresholds, top down, to decision making, an organisation can achieve optimal performance and compliance and avoid investing in redundant or ineffective functions, processes and technology.

One section of the paper addresses risk appetite:

Developing this culture requires leadership to not only define risk appetite and ethical
business standards, but to encourage employees to do the right thing through clear communication of objectives and risk appetite; incentive and reward systems that are aligned to employees “doing the right thing”; and role specific ethics, compliance and risk training programmes. It also requires that management be prepared to take a hard line with employees who don’t “do the right thing”, but not with those employees who truly “do the right thing” and achieve sub-optimal results.

No business deal should ever justify putting your company’s reputation at risk.