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28/06/2018 / Enterprise Risk Management, Risk Governance

Risk Governance and the Three Lines of Defence

Effective risk management requires governance structures and processes commensurate with the organisation’s context. Regardless of the organisation’s size and complexity, implementation of the three lines of defence should be the first principle of an effective risk management framework.

At each line of defence there needs to be risk governance to support and provide oversight to the risk management framework

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04/06/2018 / ERM, Risk Manager, KRIs, Press/Media

What we can all learn from the APRA prudential inquiry report into the CBA

Taking Risk Management to the next level 

The APRA report of the prudential inquiry in the Commonwealth Bank of Australia (CBA) was issued on 1 May 2018 https://www.apra.gov.au/media-centre/media-releases/apra-releases-cba-prudential-inquiry-final-report-accepts-eu. On the following day, I was flying from Sydney to Perth and downloaded the report to "skim" read the key points on the flight.

I began reading on take-off and on landing 4 hours later, had completed the full 111 pages. I could not put it down.

Rather than a negative feeling of what we are doing wrong, I saw instead a rich source of information that we can use to take risk management to the next level.

On page 5, the report states:

"The Report that follows may read as a long catalogue of shortcomings. That would be too narrow a read. The Panel acknowledges the undoubted financial strength and acumen of the CBA, its global standing, and the avowed commitment of staff to servicing customers. CBA needs to translate this financial strength and good intent into better meeting the community’s needs and the standards expected of a systemically important bank in Australia. The Report is a roadmap for this journey."

It is also clear that many other financial institutions accept that they could change the name "CBA" on this report to their own and it would be equally as valid. At Protecht, we see this as a must-read for anyone serious about taking their risk management to the next level. It is, as APRA states, "a valuable roadmap".

The following is a summary of the main lessons we can learn from the report, and also the main themes that run through the report. 

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01/06/2018 / Enterprise Risk Management, ERM, Risk in Motion

Enterprise Risk Management - Connecting the Dots

Connecting the dots (in this case, the risks).

This is an updated version of the original article published on 06/12/2016.

It has been a bit of a journey over the last 15 years. At Protecht, we started with the vision of a SaaS enterprise risk management solution that allowed connection of risk to the core components of what was back then, considered an ERM framework. This meant that our central library of risks was not only used in the risk and control assessments but also linked to key risk indicators, attestations and incidents. This enabled our client base to get a more fluid picture of risk and was the genesis of the RiskInMotion™ concept.
 

What was missing back then was the business intelligence engine to bring it all together.

Roll forward to 2018 and there are even more dots to connect. Over the last 5 years we have seen our clients rapidly build and deploy the following additional web-based forms to capture, workflow and report on risk related information pertaining to:

  • Fraud
  • Supplier due diligence
  • Conflicts of interest
  • Internal audit findings
  • Complaints
  • Compliance breaches
  • Business continuity plans and tests
  • Conflicts of interest
  • New products evaluation
  • Ex gratia payments
  • Policy management
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01/06/2018 / ERM, Risk and Reward, KRIs

Balancing the Voices of Reward and Risk

The financial services industry is under the microscope in Australia with the Royal Commission in full swing, and the recent APRA (Australian Prudential Regulatory Authority) report into the CBA (Commonwealth Bank of Australia).

Many sobering findings have been aired, but looking at this positively, the findings provide an excellent blueprint for the development of stronger risk management and business practices going forward. The APRA report is really a roadmap for any organisation wishing to raise its risk management to the next level.

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25/05/2018 / Bow Tie Analysis, Risk Culture, Risk Appetite, Risk Manager

Are you a risk manager?

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I am often asked “what are the key requirements that make a good risk manager?”  My first response is “to be able to walk on water”. Such is the required varied skill set of a good risk manager.

The roles and responsibilities of the risk manager are many and varied depending on the organization they belong to. I will use the example of an organisation that has an independent risk management function where risk, and the day to day management thereof, is owned by the business. Let’s look at the key characteristics of the CRO and the staff of the independent function.

The main function of the independent risk manager is to review and challenge what the front line business is doing to manage risk. In addition, they should be seen as subject matter experts and assisters in developing and maintaining the risk management frameworks. They should be seen as value-adding and adopted by, and engaged with, front line staff.

What are the key skills and characteristics needed to be a success in this role? Here is my list:

  1. Risk management is to a large degree an art form. This requires a strong right hand (artistic) brain, able to cope with qualitative and inexact concepts and able to “see” into the future.

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18/05/2018 / Enterprise Risk Management, Risk Analytics, Risk Intelligence

Improving your insights into Risk with Historical Models

Enterprise Risk Management (ERM) software manages the processes and the risk related data that drive risk behaviour, including Risks, Controls, Issues and Actions, Incidents, Key Risk Indicators (KRIs), Audit Findings, Compliance Obligations, Risk Control Self-Assessment (RCSA), Compliance Questions, and Compliance Attestations to name a few.

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03/05/2018 / Compliance Management, Enterprise Risk Management

Understanding Compliance Risk

Today, corporations and government agencies are facing an unprecedented wave of regulatory obligations and increased penalties for non-compliance. The financial services sector, as an example, needs to comply with a myriad of prudential regulations, federal privacy, AML/CTF, consumer credit and protection laws to name a few. Obligation registers now contain over 1,000 entries for compliance teams to deal with. In smaller organisations, these teams are often under-resourced due to compliance being a cost centre.

In this blog, we will discuss issues around some of the complexities of effective compliance risk management.

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18/04/2018 / Risk Culture, Risk Management, Risk and Reward

Risk Management to Management? Is “Decision Support” the future?

Three key treasures of good risk management

The future of “Risk Management” would look brighter if we removed the word “Risk”. It is just “Management”. If “Risk” is “the effect of uncertainty on objectives”, Risk Management must be “managing the effect of uncertainty on objectives”. This is “Outcome Management”.  

Business Management involves making decisions aimed at achieving business objectives. Outcome management is therefore just management.

The future success of risk management relies on making it an integral part of management. This will only happen if risk management provides the right incentives. Humans and hence organisations run by humans, respond to incentives. Read related article: '10 keys to Risk Management Success'.

Psychologists have discovered that when a person is handed an unexpectedly hot cup of coffee, they typically drop the cup if they perceive it to be inexpensive but manage to hang on if they believe the cup is valuable.

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27/03/2018 / Enterprise Risk Management, Risk Management, Risk Management Training

Enterprise Risk Management made Personal

PRM and ERM – use it in your Personal life

PRM? As we haven’t got enough acronyms in risk management already, I thought another one was required– right?  So, what is PRM? I just made it up – Personal Risk Management! 

They say charity starts at home – so why don’t we look at ERM, sorry PRM, in our personal lives? We can learn a lot from what we do well in our own lives and apply the same principles to our work lives and, bingo, we have good ERM working in our business!

One of the objectives of most people in their personal lives, I hope, is: To live a long and healthy life.

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02/03/2018 / Enterprise Risk Management, Risk Culture, ERM

How to promote Risk Culture in your team

In a recent discussion with a colleague on preparing for 'black swan' events, we concluded that regardless of the size, type and structure of an organisation, it was having the right risk culture that was the key success factor in preparing for and surviving an improbable event.

Our view is that getting the right culture to support risk management across the business is the most important ingredient for success. But what actually is this thing called 'risk culture' and where can you get it? We believe that risk culture is the system of values and behaviours that are present in an organisation and guides all the decisions related to risk, made by management and employees. 

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