Tuesday 2 March 2010

Thoughts on the IRM annual lecture

This year's Institute of Risk Management lecture focused on messages coming from the recent World Economic Forum in Davos. I don't think attendees left filled with joy that our leaders are sure the downturn is ending anytime soon - but there were certainly some important points risk managers should take to heart.

Dr Gareth Shepherd, the speaker, made it clear that there would be closer attention to corporate governance and risk management - "not just box ticking", with world leaders personally angry with the people who brought on the economic crisis. We are already seeing measures filter through like the SEC ruling in the US.

Shepherd's advice to risk managers was to understand, even more closely, how the CFO is thinking and to "monetize" risk so that it could make it onto the board agenda and be discussed in a meaningful, standardized way. My own view is that the effectiveness of attaching a financial value to all types of risk will depend on the maturity of the board-level risk debate. If the risk and opportunity debate isn't a fixture of discussions then putting a $ value to risks will certainly grab some attention - but when risk debate is embedded in an organization then the discussion can be more nuanced pulling in topics like reputational risk which may be harder to monetize.

No comments:

Post a Comment