There is little doubt that companies were blindsided by the financial crisis and were, in many cases, ill prepared for the stress it put on them.
The glaring and costly outcome is that risk management in many companies and in many countries failed.
The crisis has underscored the need for companies to take a sobering look at their approach to risk management, according to Norman Marks, CPA, Vice President, Evangelist, Business Analytics at SAP.
Marks was a speaker at the marcus evans 4th Annual Enterprise Risk Management Conference that took place in Miami, FL in March.
The economic crisis of the last few years has forced a renewed focus on the process of risk identification, management and mitigation at corporations across North America, he says.
“Executives are taking a much closer look at their strategic risk management channels in order to formulate more rigorous and effective Enterprise Risk Management programs. The interaction between executive management, the board of directors and company shareholders has presented numerous challenges and opportunities in the management of emerging risks.”
There is no question that risk management in many areas failed and this has been well documented in reports from the OECD, the Basel Commission, the NACD among others, he points out.
“Now attention is being given both to the critical need for risk management within the organization, and the need for effective oversight of risk management by the board.
"The need is not limited to financial services companies. Every organization has to manage uncertainties and their effects. For example, questions have been raised about risk management at BP. BP has responded aggressively, making safety and operational risk management the central part of bonus calculations for its executives.”
Marks notes that most people focus on the negative side of risk, but risk is also about seizing opportunities when they present themselves.
“If you are not managing risks, you will not optimize performance. It’s not just to stay in compliance with laws and regulations, or avoid the effects of hurricanes and fires. It’s to optimize performance. It’s to make risk-intelligent decisions – decisions made with full knowledge of the risks, and with plans to manage them. Risk management enables more reliable and sustained, optimized performance.”
Pulling the risk management threads together, Marks believes that slow progress is being made. “But, it’s not as fast as most of us in the field would like to see,” he admits.
The marcus evans 4th Annual Enterprise Risk Management Conference took place in Miami, FL, March 10-11.
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