Risk best if planned for
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Tuesday, 17 October, 2000 - 21:00
RISK management needs to be part of the business planning process, says Pricewater-houseCoopers partner Simon Ford.
Mr Ford heads the firm’s Global Risk Management Solutions practice.
“Risk management is best implemented at the planning stage,” he said.
“Firms need to know what they want to achieve and what will stop them from meeting those objectives.
“A company needs to know what drives its results. From there it can create an inventory of all the things that can stop it from attaining those results.
“Companies also need to work out their risk appetite. How much risk are they comfortable taking?
“From there the firm can put in the appropriate mitigation measures to counter each risk.
“It’s a policy issue as well as a detailed management issue.
“It might mean the company needs to put in a simple control mechanism or change the way a business unit operates.”
Mr Ford said a risk management framework usually ranged from planning to implementation to day-to-day management.
“Each business unit will be monitoring each risk,” he said.
CPA Australia finance advisor Susan Campbell said a lot of businesses were starting to carry out “what if” analyses of every aspect of their business.
“It’s becoming about assessing risks and working out what to do if a given thing happens,” Ms Campbell said.
“The process often starts with management and, if it’s a good company, involves the employees. It is important to get the employees on side because they often have a better idea of the risks facing their area.”
Ms Campbell said risk management was moving away from its insurance and finance focus and becoming a whole-of-business issue.
“A lot of businesses are putting risk management policies throughout their operations,” she said.
“These look at how much a particular risk could affect a company’s bottom line.”
Such risk policies include dealing with a rise in interest rates and involve measures such as hedging.
“These policies also determine whether a risk management tool is even required,” Ms Campbell said.
“It’s also about looking at what a firm’s competitors are doing to manage their risks.”
Risks to a firm’s bottom line can take in all manner of aspects from the financial and political climate through to customer perceptions.
Mr Ford heads the firm’s Global Risk Management Solutions practice.
“Risk management is best implemented at the planning stage,” he said.
“Firms need to know what they want to achieve and what will stop them from meeting those objectives.
“A company needs to know what drives its results. From there it can create an inventory of all the things that can stop it from attaining those results.
“Companies also need to work out their risk appetite. How much risk are they comfortable taking?
“From there the firm can put in the appropriate mitigation measures to counter each risk.
“It’s a policy issue as well as a detailed management issue.
“It might mean the company needs to put in a simple control mechanism or change the way a business unit operates.”
Mr Ford said a risk management framework usually ranged from planning to implementation to day-to-day management.
“Each business unit will be monitoring each risk,” he said.
CPA Australia finance advisor Susan Campbell said a lot of businesses were starting to carry out “what if” analyses of every aspect of their business.
“It’s becoming about assessing risks and working out what to do if a given thing happens,” Ms Campbell said.
“The process often starts with management and, if it’s a good company, involves the employees. It is important to get the employees on side because they often have a better idea of the risks facing their area.”
Ms Campbell said risk management was moving away from its insurance and finance focus and becoming a whole-of-business issue.
“A lot of businesses are putting risk management policies throughout their operations,” she said.
“These look at how much a particular risk could affect a company’s bottom line.”
Such risk policies include dealing with a rise in interest rates and involve measures such as hedging.
“These policies also determine whether a risk management tool is even required,” Ms Campbell said.
“It’s also about looking at what a firm’s competitors are doing to manage their risks.”
Risks to a firm’s bottom line can take in all manner of aspects from the financial and political climate through to customer perceptions.