DISCUSSION Effective risk leadership needs specialist role supporting the board

by Yolanda Villafuerte _______6th May 2015
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Boards are failing to navigate the changing risk landscape effectively, resulting in significant loss of value, according to research from leading players in the business community. As a result, corporate risk leadership needs rethinking and boards should consider appointing an executive voice of risk.
The report, Tomorrow’s Risk Leadership: delivering risk resilience and business performance, was written by London-based global business think tank Tomorrow’s Company and launched yesterday in collaboration with the Good Governance Forum members, Airmic, CIMA, IHG, Korn Ferry, PwC and Zurich.
It challenges businesses and business leaders to consider whether the risk leadership in their organisations is sufficient to meet the demands of an increasingly fast-paced and interconnected world. While companies are usually strong at managing their core risks, all too often, the management of risk remains a siloed operation, detached from strategy.
The report’s key recommendation is that organisations consider establishing an executive voice of risk who leads the risk agenda, helps deliver the business model and drives business performance. The risk leader would be at or close to board level and should help boards to be more forward looking, enhance their decision-making capabilities and provide a corporate-wide view of risk.
The risk leader should have a strategic skillset and broad business knowledge to spot early-warning indicators of the genesis of an atypical crisis event and enable a more rounded approach to risk. Only then, according to the report, can a business truly drive resilience within the organisation.
The report also says that setting the right risk culture is vital. It recommends taking an integrated approach to risk, defining the appropriate risk appetite for the organisation, and creating the supporting culture and behaviours required.
The formal launch of the report took place at Crown Plaza – The City yesterday (Tuesday 5 May 2015) led by Judith Hackitt CBE FREng, Chair, Health and Safety Executive, along side John Ludlow, SVP & Head of Global Risk Management, IHG, John Hurrell, Chief Executive, Airmic, John Scott, Chief Risk Officer, Zurich Global Corporate, Richard Sykes, Partner, PwC and Mark Goyder, CEO & Founder, Tomorrow’s Company.

At the launch event Judith Hackitt, CBE, FREng Chair of the Health and Safety Executive, remarked:

I have no doubt that the principles described here in “Tomorrow’s Risk Leadership” are applicable across every board and they apply today – we need it now, not tomorrow.”

Mark Goyder, CEO & Founder, Tomorrow’s Company stated:

A culture of challenge is a key sign of a healthy company. Deference and group think are dangerous on the executive committee and the board. Finding and empowering the right risk leader is a vital enhancement of a company’s resilience and robustness.”

The guide highlights four key components of Tomorrow’s Risk leader’s role:

• strategic partnership
• executive leadership
• culture
• organisational capability.

The report is based on dialogues, research, and case studies in collaboration with the Good Governance Forum members and partners to inform a different understanding of the significance of risk in business.

John Hurrell, Chief Executive of Airmic, the UK association for risk managers and insurance buyers, remarked:

“The complexity of risks facing businesses is unprecedented, while the pressures on boards to understand them are at an all-time high. The challenge is not just to manage these risks but to navigate them in a way that turns them into an advantage. The time has therefore come for a rethink of risk leadership across the business community and this report should be a must-read for all board members.”

John Ludlow, SVP and Head of Global Risk Management, IHG remarked:

“Boards need risk managers to help coordinate effort across their companies to ensure they adapt to take advantage of changes in the macro environment, win the competitive race and deliver vision and commitments to stakeholders. Leading and coordinating effort across silos and regions for the common good takes advanced risk leadership and risk management capability.”

John Scott, Chief Risk Officer, Zurich Global Corporate stated:

“New regulation and governance codes increasingly call for the board to understand what risks an enterprise faces and how these link with an overall risk appetite. This is not a simple task and requires a deep knowledge of the value drivers and their link with measurable outcomes of a successful strategy. These will be different for different companies, but it is critical for sustained business success that boards take on this new approach to risk leadership.”

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