Risk Management – From The Clouds to Your Desk
Risk Management has long been linked to idealists who believe that all risk is preventable. This simply isn’t true. Many risks are outside our control, as evidenced recently in Christchurch.
The focus on corporate Australia has never been so high to prevent loss. You only have to look at the increase in advertised ‘Risk Manager’ positions. Many of these positions have a treasury/finance focus, but the mandate is still to develop strategies to improve the Risk Management position of the organisation. As a listed entity, you are also required to ‘consider’ the requirements of Principle 7 within the ASX’s Recommendations for Good Corporate Governance. This is a guide only but through corporate Australia’s adoption of this platform (as a minimum benchmark), it is the new industry standard.
Risk Management has gone from a theory ‘in the clouds’ to a genuine business cost and set of behaviours that are expected to be adopted within your workplace.
Clients often request validation that their current approach is ‘fit for purpose’. With this, comes a review of their processes and risk mitigation strategies. Too often the process stops at ‘what we are doing now’, when the focus really needs to be ‘what else can we do’. Identifying the future opportunity creates renewed organisational focus and also provides another means to seek management buy-in for additional capital and further validation for imposing behavioural change.
A key-challenge with investing in Risk Management is the absence of a linear benefit. For example, investing $1m in improving your risk will not save you a $1m from your Workers Compensation or Property insurance premiums. People forget that insurance is a very small part of Risk Management – Risk Management is not the sole lever to reduce insurance premiums, even though many hope this to be the case.
Taking a holistic view, there are however other benefits created for you by investing time and capital in risk improvement, including:
- Reduction in losses preserving your balance sheet and making you more attractive to the insurance market.
- Additional engagement of the insurance market who may assist you in the improvement programs through ‘free specialist resource’.
- Realisation of required Cap-ex savings into Employee Safety. Investing in employment well-being strategies provides a genuine focus.
- Making you a more attractive employer in a competitive labour market.
- Improving your safety record as a means to build enterprise value, making you a more attractive investment opportunity.
- Improving the value of your infrastructure.
Risk Management can be business driven, rather than a response to your audit program. Risk Management can create immense value to your business, not simply be perceived as a drain on capital and resource. We can help you demystify and unlock the value created through risk improvement.
John Mutton
Managing Principal
03 8610 8102
John.mutton@interrisk.com.au