Risk managers should be seen as highly valued and trusted advisers to their boards however this is not always the case. Securing the necessary buy-in and engagement from board members is an on-going challenge.
According to risk management association, Airmic, many risk managers have work to do in this area, but it also sees more senior roles developing for those who want them. It favours more businesses appointing a business risk leader to ensure that firms are ready to deal with the huge amount of exposures that exist now and in the future.
Airmic also wants to see more risk managers in these strategic roles and it states: “For risk professionals to meet the challenge, they must broaden their capabilities to encompass leadership, business and strategic skills.”
According to Julia Graham, Airmic's technical director, risk management is transitioning from a discipline to a profession and she believes risk managers need to be represented on boards in addition to advising them.
Representation for risk
She comments: "The board remains the natural place for the ultimate ownership of risk but it needs support in navigating today's more complex and challenging world. It would be inconceivable for a board not to have expertise represented in areas such as their core business, finance and law, so why not for risk? It is, after all, poorly managed risk that can bring down a business.”
This is about moving from what is seen as a largely technical role to a strategic one, with far more influence on corporate decisions. So, what should risk managers be doing to ensure they are seen as leadership material, ready for the opportunities opening up in the future? Some pointers include:
Show that the risk register is forward looking – such as on digital exposures and other disruptors - and encompasses new as well as traditional threats
- While regulatory issues are key, risk managers should not over focus on compliance and instead show they have commercial and strategic insight. They should also show how relevant their work is and look to have the risk management programme closely aligned with overall strategy and the budget
- Be prepared to change perceptions about risk management and avoid being seen as the individual who always says ‘no’
- Work on communication skills to show ability in speaking broadly on business issues and simplify complexity
- Ensure there is understanding of risk management across the business and encourage input into risk planning from all those affected. Risk managers may want to introduce regular informal training for boards to provide updates
- Promote the fact that far from being a hindrance, enterprise risk management is vital to business success – provide access to studies that confirm the link between ERM and business longevity and profitability
- Ensure qualifications are relevant and up to date. This could include looking at the new European Certification of Risk Management Professionals, available from risk association, FERMA.
Whether risk managers join boards or are increasingly seen as key advisers, it is clear that they should be taking a collaborative approach and working with others in leadership positions. There may well be tensions between those promoting risk management and those wanting to bring introduce new approaches, change practices and raise the stakes. But if risk managers are at the table and work as part of the strategic team, this is the way to embed a sound culture and increasingly be seen as business influencers.