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Living and working in a riskier world
From Risk Management to Risk Leadership
20 March 2014
Julia Graham
FERMA President
What we stand for
 Co-ordinate, promote and support the development and use
of risk management, insurance and risk financ...
Where we are
22 member associations in 20 countries
4336 individual
members who are
responsible for risk
management and / ...
Who we are
Our leadership team
Pierre Sonigo
Secretary
General
Florence Bindelle
Executive
Manager
Alessandro
de Felice
Vice Presiden...
"Three" lines of defence
Source: ECIIA - Making the most of the Internal Audit Function
Risk management
“Why do you have brakes in a car? So you can drive faster safely. Why do you have good risk
management? So...
No risk is an island
It's risk management Jim but not as we've known it
A strategic business
discipline that supports
the achievement of the
or...
Old risk management practices
– Risk management as stand alone activity
– Driven by audit
– Based on rules
– Off-the-shelf...
New risk management practices
– Risk management driven by objectives
– Board and management driven – by example and from t...
Leadership in risk management
• Board level supervision of risk management increasing and there is increasingly a
role for...
The first standards committee
Standards commonly used
Source: RIMS 2013 Benchmark Survey Produced by Advisen
All rights reserved.
 ISO 31000 up 5% from...
COSO ERM and ISO 31000 are different
Preferences can vary bias -
audit and risk
COSO ISO 31000
Lengthy Short
Focused on ER...
Route to corporate failure
Weaknesses that make organisations prone to crises and escalation of crisis into disaster:
1. B...
Reputation is now higher in our risk thinking
 Reputations take years to build and minutes to destroy
 More than giving ...
Roads to Resilience "future proofing"
The next generation
 Capability to deal with the unexpected
 Everyone acutely awar...
Principles of the resilient organisation
 Exceptional radar
 Value and build strong relationships internally and externa...
Challenges to achieving resilience
The Risk Manager
 Overcoming barriers
– don't over analyse
 The role is changing
– no...
Risk management will become risk leadership
Position
 risk management will continue to assume a higher priority
 strong ...
Developments in risk management as a profession
 What profession?
 Predicted that there will be fewer but more senior pr...
Diversity in the teams works
Final Observations
 Effective risk management in NOT just about compliance
 Risk is at the heart of strategy and effecti...
Knowledge
Skills
EthicsCPD
Business
model
What FERMA is doing
26
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Julia graham@bdm2014

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    1. 1. Living and working in a riskier world From Risk Management to Risk Leadership 20 March 2014 Julia Graham FERMA President
    2. 2. What we stand for  Co-ordinate, promote and support the development and use of risk management, insurance and risk financing in Europe  Be a significant stakeholder in the decision making process at the European level on risk management, insurance and risk financing – Profession – Innovation – Diversity  We go where others do not go  Leading risk management and insurance across Europe
    3. 3. Where we are 22 member associations in 20 countries 4336 individual members who are responsible for risk management and / or insurance in their organisations
    4. 4. Who we are
    5. 5. Our leadership team Pierre Sonigo Secretary General Florence Bindelle Executive Manager Alessandro de Felice Vice President Michel Dennery Vice President Jo Willaert Vice President Julia Graham President Fernand De Winter Treasurer
    6. 6. "Three" lines of defence Source: ECIIA - Making the most of the Internal Audit Function
    7. 7. Risk management “Why do you have brakes in a car? So you can drive faster safely. Why do you have good risk management? So you can pursue your business goals more energetically….” FT "In an emergency the driver needs to know where the brakes are and how to use them properly. This is why you need good crisis management" …. JG
    8. 8. No risk is an island
    9. 9. It's risk management Jim but not as we've known it A strategic business discipline that supports the achievement of the organisation's objectives by addressing the full spectrum of its risks and managing the combined impact of those risks as an interrelated risk portfolio
    10. 10. Old risk management practices – Risk management as stand alone activity – Driven by audit – Based on rules – Off-the-shelf systems and solutions with pre-determined lists of risks – Focused only on threats – Mainly hard controls about tangible things – insurable – Artificially implemented or imposed – Stand-alone and not part of the business – Static, out-of-date – "we've done that" and filed away – Viewed as purely a cost overhead – Abandoned because nobody pays attention Source: International Federation of Accountants - IFAC
    11. 11. New risk management practices – Risk management driven by objectives – Board and management driven – by example and from the top of the business – Based on principles and not rules – Tailor made to the business – Focused on opportunities as well as threats – As much about social / human / cultural aspects – not insurable – Organically implemented – "Part of the way we do things here" - integrated – Dynamic, evolving – not left on a shelf – Creates results and add value – with measures – Supported and long term Source: International Federation of Accountants - IFAC
    12. 12. Leadership in risk management • Board level supervision of risk management increasing and there is increasingly a role for leadership of risk management • The majority of companies have education and review processes in place that keep the Board informed about risk exposures • Most think communication between the Board and the "CRO" could be better • Companies aspire to improve the link between risk management and strategic planning • Risk management has some way to go to use the risk management function for making more effective strategic decisions • Risk-based incentives as part of remuneration slow • Brand and reputation rising concerns • Some executives and "experts" cite lack of risk management talent as an important area especially in emerging products and markets • Processes to define risk appetite now in place at nearly half of the companies Source: Leadership in Risk Management – Zurich, Harvard, FERMA and PRIMO
    13. 13. The first standards committee
    14. 14. Standards commonly used Source: RIMS 2013 Benchmark Survey Produced by Advisen All rights reserved.  ISO 31000 up 5% from 2011  COSO up 2% from 2011
    15. 15. COSO ERM and ISO 31000 are different Preferences can vary bias - audit and risk COSO ISO 31000 Lengthy Short Focused on ERM General approach to managing risk One cube Framework and process Skewed to negative Risk can be positive or negative Risk already exists Risk tied to achieving objectives Risk & opportunities Opportunities also source of risk More sequential process More iterative process Many organisations use COSO and ISO 31000
    16. 16. Route to corporate failure Weaknesses that make organisations prone to crises and escalation of crisis into disaster: 1. Board skills and NED control risks 2. Board risk blindness 3. Poor leadership on ethos and culture 4. Defective communications 5. Risks arising from excessive complexity 6. Risks arising from inappropriate incentives 7. Risk "glass ceilings" Necessary developments – Scope, purpose and practicalities of risk management need to be re-thought from the Board down – Education of risk professionals needs to be extended – Risk professional's status needs to change – Not necessarily more CROs Systems that prevent crisis escalating into disasters Source: Roads to Ruin - a report by Cass on behalf of AIRMIC, Lockton and Crawford
    17. 17. Reputation is now higher in our risk thinking  Reputations take years to build and minutes to destroy  More than giving correct advice and more than a brand – understanding the value of reputation - often the largest asset – taking ownership of reputation – having a holistic and systematic risk management process – understanding the expectations of our clients – identifying the main causes of risk – applying joined up management – viewing reputation as a risk consequence – having good crisis management for when things go wrong
    18. 18. Roads to Resilience "future proofing" The next generation  Capability to deal with the unexpected  Everyone acutely aware of risk – "bristling with risk awareness"  Not a special function – everyone's job  Widening scope of risk  Widening of knowledge and skills for the "risk manager"  Moving away from physical assets and people  Client experience, brand and reputation key assets  The range of assets at risk has changed  In the world of social media firms cannot risk manage as if nothing has changed  Risk management more facilitators than managers  All levels of risk embraced Evolution from risk management to building resilience
    19. 19. Principles of the resilient organisation  Exceptional radar  Value and build strong relationships internally and externally  Leaders that are respected and respectful  The ability to respond rapidly  Diversified resources  We live and work in a riskier world  Top Management – Board directors believe that they should spend more time on strategy, talent and risk  Risk Managers – Risk managers must develop business leadership skills, become a business discipline and add significant value - or stay as fragmented technical people called upon only when needed Source: Roads to Resilience AIRMIC
    20. 20. Challenges to achieving resilience The Risk Manager  Overcoming barriers – don't over analyse  The role is changing – no hiding behind rules and regulations – valued senior advisor – get out and engage  More about culture, behaviour, mind-set and insights Enablers and behaviours  People and culture  Business structure  Strategy, tactics and operations  Leadership and governance
    21. 21. Risk management will become risk leadership Position  risk management will continue to assume a higher priority  strong board involvement advocated to facilitate strategic and enterprise-wide risk  more energy devoted to defining risk appetite, tracking, measuring and analysing risk Challenges  risk ownership and communication at all levels  links between risk management and strategic planning and management  communication between the board and risk management  risk based incentives  risk management talent pool with the right talent  risk forecasting Evidence to suggest that well risk managed businesses will be more profitable
    22. 22. Developments in risk management as a profession  What profession?  Predicted that there will be fewer but more senior professionals – as risk management matures and moves towards first line management  But the profession is generic and hard to define  Professional certification – knowledge – experience – ethics – continuing professional development  Some similarities to NEDs  Watch this space ….
    23. 23. Diversity in the teams works
    24. 24. Final Observations  Effective risk management in NOT just about compliance  Risk is at the heart of strategy and effective risk management should be an enabler and a potential differentiator  Growth in a flat market can only be achieved by taking risks – these must be calculated and transparent  Reputation is critical and reputation risk management should be prioritised  The tone is set at the top and the C-suite will take a stronger role in leading the risk management effort in Europe  The information required to take risk aware decisions is most likely to exist already inside the company  Risk management must be owned by the business  Risk managers must be fit for the challenge
    25. 25. Knowledge Skills EthicsCPD Business model What FERMA is doing
    26. 26. 26
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