Risk Management Insights

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David Tattam, Director Research and Training

Author of 'A Short Guide to Operational Risk', David Tattam is an internationally recognised specialist in all facets of risk management, particularly at the enterprise level. His career includes many years working with PwC, as well as two Australian banks. His achievements include the creation of the Middle Office (Risk Management Department) for The Industrial Bank of Japan in Australia and the complete implementation of all Australian operations, systems, procedures and controls for Westdeutsche Landesbank (WestLB).
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Recent Posts

14/12/2018 / Risk Reporting, Risk and Reward, Risk Data, Intelligence, Dashboards

Spaceships, Prince Charles and reporting truer business performance

This article was first published in the November 2018 issue of Governance Directions, the official journal of Governance Institute.
  • The accountability of an organisation for its performance is limited by a narrow focus on its financial performance.
  • Developments in risk management and accounting provide a practical solution for measuring true performance using a mix of reward, risk and risk appetite.
  • Measuring true performance requires the measurement of both risk and reward across each stakeholder.

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20/11/2018 / Risk in Motion, Risk Reporting

Is your risk management a little static?

How do we make decisions based on risk reward when the risk information is out of date? Traditional point-in-time reporting in risk management can result in an artificial view of how your organisation is doing. In this video, David Tattam talks about what you can include in a Risk in Motion report to create a dynamic risk profile of your organisation.

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08/11/2018 / Decision Making

Is risk management front and centre in your decision making?

In this video, David Tattam breaks down the questions you should be asking to better integrate risk management in your organisation's decision making.

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15/08/2018 / Risk Management, Risk Appetite, Compliance Management, Decision Making

Can I? Should I? Would I? Using compliance as a decision making tool

Compliance is the act of “conforming to rules”. Deciding to, or not to, conform to rules affects the decisions we make. Compliance is therefore an integral part of decision making.

The question is “What are the rules that we will apply in our business decisions?” These rules can come from two primary sources as described by the ISO 19600 Standard: “Compliance Management Systems”. This standard recognises two main types of compliance obligations:

• Compliance Requirements: Requirements that an organisation has to comply with. These normally arise from external regulatory requirements and contractual requirements.

• Compliance Commitments: Requirements that an organisation chooses to comply with. These are normally manifested through internal policies, practices, codes of conduct, etc. 

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23/07/2018 / ERM, KRIs, Press/Media, Risk Manager

Importance of 'Challenge' in Risk Management

In my earlier blog “What we can all learn from the APRA prudential inquiry report into the CBA” I noted that one of the strong themes of the report was the importance of “Challenge”. In fact, it is mentioned approximately 75 times including in the following recommendations:

  • Recommendation 7. The CEO ensure that the Executive Committee…. engages in constructive challenge and debate.

  • Recommendation 10. CBA ensure that business unit Chief Risk Officers have the necessary independence to provide effective challenge to the business. 

  • Recommendation 27. Senior leaders reinforce key behaviours of increasing self-reflection, giving and receiving constructive challenge and dealing with conflict effectively.

For those familiar with the three lines of defence model, the second line of defence "Risk Management" has as its key role, “Review and Challenge”. Read the article: Risk Governance and the Three Lines of Defence.

This blog takes a look at:

  • The meaning of challenge.
  • The importance of challenge in supporting strong risk management.
  • The reasons why challenge is so difficult in practice?
  • What a good challenge culture looks like and how can it be practically embedded within an organisation’s culture.

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

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 / Risk and Reward, ERM, 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 Appetite, Risk Manager, Risk Culture

Are you a risk manager?

risk.png

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

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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