Risk Management: An Enterprise-Wide Endeavor

Lora Bentley

It's not surprising in this kind of economy that risk management is taking center stage again. What's different this time, according to CFO.com, is that there are so many different types of risks "converging" at once. Writer Katie Plourd explains:

What makes the current situation so dire is the way in which so many major risks are converging all at once: a credit crisis, volatile commodity prices, soaring government debt, rising unemployment and its attendant impact on consumer spending - the list goes on. None of those risks are lost on CFOs, of course.

As a result, more companies are looking at risk management as an enterprise-wide endeavor, rather than something for which each department is individually responsible. But just having enterprise risk management strategies and technology isn't enough, observers say. They must be put to use. Moreover, according to Floyd Chadee, the CFO of StanCorp Financial Group, who's quoted in the piece, if the system and strategy you're using doesn't mesh well with the company's culture, they will not work.

 

For some companies, that means appointing a chief risk officer. Others give their CFOs the risk management responsibilities. Either way, according to executive search firm A.E. Feldman, risk management professionals are in increasing demand in this season -- especially those who can handle the wide variety of risks on which companies are now focused. From a recent A.E. Feldman blog post:

Financial and risk professionals with expertise in processes for assessing credit and counterparty risk and liquidity risk are in demand along with professionals with experience in restructuring and litigation support that can provide advice on how to respond to the evolving market conditions and subsequent regulatory changes.


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Jan 15, 2009 3:54 AM Brandon Malloy Brandon Malloy  says:
The management of risk presumes that people can accurately estimate risks when they haven't happened yet. Many studies have shown that people routinely overestimate the risks when they feel they aren't in control but underestimate the risk when they feel that are. Driving a car is hundreds of times more dangerous than flying statistically, yet people get white knuckles when they fly, but not when they are driving their kids to the mountains. Mountain biking, skiing, scuba diving, flying a private plane are all considered okay by the people that do them.The same is true in business - when people outsource everyday, or contract out jobs that used to be done internally, they perceive these as being "okay and safe" because they are used to doing it and have been rewarded for doing it. What has happened is that all the resiliency and redundancy has been stripped from our businesses. By centralizing and outsourcing, a single systematic operational fault can bring the whole house of cards down.People respond to catastrophe and then in as little as six months go back to their old habits. So, while paying attention to risk management is now in vogue, expect rational discussion of whether we should send all our IT jobs offshore to India or China and maintain our important business records in remote locations held in trust by a supplier of IT services to return to the status quo. Like the Dot Com bubble, this is the latest crisis and we will all race around with risk in our minds until we forget. That will be in about two years. Reply
Aug 26, 2009 7:39 AM PSI PSI  says:

As Lora Bently said,  just having enterprise risk management strategies and technology isn't enough. Enterprise risk management (ERM) in business includes the methods and processes used by organizations to manage risks and seize opportunities related to the achievement of their objectives. All organization should act by that.

www.ermsummit.comwww.gsmiweb.com

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