Faye Sadler-Clark examines how Risk functions can shift from standing in the way of change, to leading the way.
Change is a given part of any business, with Transformation programmes allowing businesses to their offerings for customers. With so much change comes a need for organisations to adapt in order to deliver faster, and at a lower cost. However, functions such as Risk & Compliance are traditionally slower to adapt and often cannot keep up with the pace and skills required by the teams they are supporting – to the point where they come to be viewed as an obstacle to change, rather than working to facilitate it.
When organisations look to deliver cost savings, to work smarter, and to develop more agile ways of working, Risk teams are not typically an obvious target. As a result, many organisations are operating with a Risk function geared to support the organisation ‘as was’, rather than one which reflects the organisation’s current ‘as is’ demand. This is akin to running a website that is not optimised for mobile browsing, knowing that the majority of your customers transact through their mobile phones.
Critically, these historic, functional Risk models also represent an untenable cost base. It’s time for change, so what does the future face of Risk look like? What are the key things that organisations need to be considering?
Risk management as an enabler
Organisations need to change the narrative from risk management as a barrier to progress to effective risk management being an enabler – positioning Risk as a value creator, used to drive organisational performance.
To do this, organisations need to think more strategically when it comes to risk management, making better decisions for better risk-return outcomes. Risk identification, assessment, control and mitigation remain fundamental, but there is increasing appetite from C-suites of progressive companies to push boundaries and look at the upside potential of considered, strategic risk taking.
Less focus on the rear-view mirror
The Covid-19 pandemic and the Financial Conduct Authority’s (FCA) introduction of the Senior Managers and Certification Regime (SMCR) have played a key role in driving business leaders to focus more energy and attention on getting ahead of the key risks facing their organisation. This typically involves boards having closer oversight of the risks for which they are accountable, and developing a deep understanding of the fundamental drivers of the systemic vulnerabilities and make-up within their identified risk profiles.
We can still learn from risk events and control failures, but a view on both horizon and real time risk enables agile decision making and timely risk management. With the growth of advancements in data analytics, machine learning, and AI there is plenty of scope for real-time risk monitoring, though simply bringing together the right people with the right skills and knowledge at the right time to manage risk events can be equally impactful.
Risk Teams: smaller, flexible, and more nimble
Organisations face continuous disruption, whether through operating model transformation, the threats (and opportunities) from emerging technologies, or external factors such as increasing competition or the ever-growing threat of cyberattacks. Flexibility and agility become hygiene factors for high performing Risk teams. They must be able to pivot quickly to effectively support their organisation in responding to, and protecting against, both existing and emerging threats.
This points away from large, potentially slow moving and siloed Risk functions, and towards smaller and stealthier teams ready to deploy when it matters most.
Risk Professionals: digitally equipped all-rounders
There is increasingly high demand for risk professionals with analytical and digital skills who can draw meaningful insight from risk data, as well as effective communicators who can bring risk to life, working and influencing cross-functionally at all levels of the organisation.
Skills and experience aside, behavioural traits can underpin the success of modern Risk teams. When considering your Risk function, top of the list should be seeking out people with insatiable curiosity for understanding key developments in the business, the industry, and the evolving regulatory landscape. Risk professionals who keep pace with their organisation’s evolving operating context are able to engage in productive dialogue, relating risk management to their audience and engendering strong working relationships. This can lead to true risk partnership, which is crucial when focusing on risk-based decision making, which can only be of benefit to the organisation.
‘What got you here won’t get you there’
Post-adjustment to the ‘new normal’ following the Covid-19 pandemic, many businesses are turning their focus further towards developing operational resilience, managing third party risks and shoring up their cyber defences. With no sign of things quieting down any time soon, now is the time to consider how your Risk function can better support the strategic objectives of your business and deliver real value.
You may be considering how aligned your Risk and Compliance function is to supporting the delivery of your business strategy. We can support organisational design review to drive performance and reduce cost through use of our holistic model, accredited by one of the UK’s leading business schools.
If you’re interested in how we may be able to support you as you take the next steps on your risk journey, please don’t hesitate to get in touch.
