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Risk Management Insights

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06/05/2016 / Risk Management Training, risk appetite

Risk Appetite – The starting point of great risk management

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The concept of risk appetite has been around for a number of years now and many organisations have developed a form of risk appetite as part of their overall risk management framework.

The process is not easy, from deciding on how the appetite should be articulated and the exact content of the statement to how the risk appetite can be cascaded through the organization to be practically used in decision making and risk evaluation. These are all difficult challenges.

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Bow Tie Analysis

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Bow Ties usually conjure up a vision of a formal event, to be used infrequently for special occasions.  For risk bow ties, nothing could be further from the truth.  Risk bow ties are ideally used by the business as everyday wear. So what are risk bow ties and what is the value of making them part of your everyday?

The Bow Tie principal to analyse and document risk has been attributed back to Royal Dutch Shell in the 70’s / 80’s.  Since then, oil and gas, mining and pharmaceutical companies amongst others have used the Bow Tie principle to explore and communicate risk. More recently, financial institutions have warmed to the idea, seeing the benefit of this simple, yet comprehensive method to understand and communicate risk.

The Bow Tie technique is a logical way to explore and communicate risk.  Its principles are simple, but the execution and presentation need care.

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14/04/2016 / 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 organization 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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01/04/2016 / Commercial Credit Risk Management

Useful Tips to Improve Commercial Credit Risk Management

Operational_Risk_Management_4.jpgMaintenance and improvement of credit risk management practices by banks and lenders have become a top priority. Let us share with you some tips to improve lender's insights into credit risk and take appropriate measures to maximise the risk/return profile.

How efficient is your collection and monitoring of covenants?

1. Review and monitor covenants

Covenants are conditions agreed to by the borrower as part of a loan term in commercial loans.  If they are effectively monitored, it can provide lenders with an early warning of loan deterioration. 

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23/03/2016 / Compliance Management, Risk and Control Self Assessment, Operational Risk

Operational Risk Management 4 –Compliance Management and Compliance Risk Management

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This is the fourth article in the series of “Learning from yourself as an expert already”. The first blog addressed Key Risk Indicators (KRI) and the second two addressed the Risk and Control Self Assessment (RCSA) process. This blog addresses Compliance Management and Compliance Risk Management.

The extent of personal compliance management depends heavily on the country in which you reside.  Some countries have few rules and nature seems to take care of itself. Other countries have many laws and regulations over personal behavior from strictly enforced speed limits to drinking laws. As an Australian, I am more used to the latter, Australia, and New South Wales in particular, is often now referred to as the “Nanny State”!  Regulatory compliance requirements are everywhere!

The starting point for compliance in your personal life is, therefore, to understand the laws and regulations that are applicable to you.  These are often written in a way that is not easily understood and we have to interpret into plain English as to what it really means to us.  Ignorance of the law, as we know, is no defence.

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09/03/2016 / information security management

Infographic: Information Risk Management Framework

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In previous articles, we have talked about the increasing importance that data collection and data management have in business strategy. On this occasion we are inviting you to consider, what are you doing with the information that the company is receiving and storing? Is there a robust process to manage, secure and protect it in an effective way and is that process an integral part of your Enterprise Risk Management framework?

In the infographic below you will see the four key stages that should make up the process. The starting point is to identify all sources of information that are used and managed by the organisation. To do this, you need to design an "Information Asset Register". Once this has been developed, you can then apply risk management to manage the risks that could stop your information management objectives being achieved.

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03/03/2016 / Enterprise Risk Management, Risk and Control Self Assessment, Operational Risk

Operational Risk Management 3 – Risk and Controls Self Assessment applied in a Business Context

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This is the third blog in this Operational Risk Management series. In the first article, I explained the incredible KRI system we all have via our five senses. In the second blog, I discussed the application of the Risk and Control Self Assessment (RCSA) in our personal lives using the example of the annual medical check-up. The seven key steps of the RCSA process were set out as part of this example. 

In this blog, we will see how the RCSA works in a business context by applying it to a business process. I will use the process of managing employee expense claims, their payment, processing and recording, a process we can all appreciate from one perspective or another. This example is deliberately at a granular level to illustrate the principles. The same concepts should be used at any level of the organisation using the appropriate level of granularity. This means that the volume of information should be similar for any risk assessment carried out.

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24/02/2016 / Enterprise Risk Management, Risk and Control Self Assessment, Operational Risk

Operational Risk Management 2 – Learning from yourself as an expert already!

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My last blog highlighted the extensive use of KRIs (Key Risk Indicators) in our personal lives and the incredible KRI system we all have via our five senses. This blog focusses on the Risk and Control Self Assessment process. Again, the expertise we have in our personal lives provides excellent guidance as to how a good RCSA should be carried out in our businesses and the value add of the RCSA process when done well.

In our personal lives, risk assessments are sometimes performed formally, such as for your motor vehicle’s annual service. Other times, however, they are performed informally, from checking the risks and controls relating to your swimming pool to assessing the risks of your house when your first child is born.

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15/02/2016 / Asset & Liability Management, Performance Management

Looking at Treasury Management Systems? 10 Key Areas to Analyse

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Protecht is a leading provider of Risk Management software. If you are interested in a cost effective Treasury Management System, then take a look at the interview with Erik Gates. As Director of Prudential Investment Services Corp, Erik explains how Protecht is enhancing his business in a highly competitive industry. 

The Treasury function is becoming increasingly important to organisations for making informed decisions to manage their risks. Many organisations are looking at how they can optimize the performance of their treasury departments.

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04/02/2016 / Enterprise Risk Management, Operational Risk

Operational Risk Management 1 – Learning from yourself as an expert already!

Operational Risk Management and the wider defined Enterprise Risk Management are often touted as a new concept. While the methodologies and processes employed may have been enhanced in the recent past, risk management is hardly new.

Humans, arising from the instinct for survival, have been using and developing risk management techniques from the beginning of time. The risk management skills, knowledge and capabilities passed onto you have meant that your personal life risk management is extremely well developed. I would argue, so well developed to the point that you are often not aware that you are practicing them.

This series of articles will consider some of those personal risk management techniques and principles how we can use them to enhance the risk management in our organisations.

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