Because time travel isn’t an option
22 October 2015
Recent events have underlined the need to stop blaming technology for risk management failures and address the real cause – us.
- “Organisations must reach the right balance – creating a good risk culture and governance structures that enable people to thrive.”
- “Risks should be managed as an integral part of being successful.”
- “The role of regulators should never be underestimated – they play an important role in keeping big companies honest.”
Paul Hopkin is technical director, Institute of Risk Management
Technology takes a lot of stick, from failures in bank legacy systems to weaknesses in film companies’ cyber security. It’s a convenient scapegoat, and one that continues to send too many boards up a blind alley. The real culprit is virtually always human behaviour.
The current VW scandal provides a clear illustration of how people are motivated to circumvent regulation, commercial sustainability and often legality. VW can’t even claim the dubious honour of originality; Ford and Honda were fined a total of $275mn by US authorities in 1998 for doing exactly the same thing.
But then history does tend to repeat itself. Staff have always been their employer’s greatest asset and biggest weakness. Everything from the probity of R&D results to the integrity of supply chains relies on the human links in the chain. So while risk management is sometimes stereotyped as obsessed with process, risk professionals themselves argue what’s critical is how thoroughly risk culture is embedded throughout an organisation.
In the pull between risk and reward, it’s risk culture which helps businesses agree their appetite for risk against their need to meet objectives; replacing knee-jerk reactions with a more strategic and resilient approach.
And, in volatile times like these, it’s risk management which helps businesses identify, review and respond to uncertainty. After all, one company’s fall from grace can be another’s opportunity.
But risk management success depends on the tone – and commitment - from the top. VW’s board is probably wishing it could go back in time and take a more proactive approach to reviewing its risks.
Given that time travel is not an option, UK boards need to get to grips with risk management now. Not least to exploit the opportunities it presents, including the significant competitive edge that comes when processes, purpose and people are all beautifully aligned.
In today’s increasingly complex environment, Boards need to understand the role of risk management in corporate success. Find out more at: www.theirm.org