Imbibing a Risk Management Culture

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 Risk management knowledge and skills are vital tools for organisations wanting to navigate the complex world of uncertainties, write Obinna Chima and Nume Ekeghe

In order to cope with the challenges of creating consistent and workable processes for managing their businesses, organisations need to ensure that they embrace the principles of risk management at all levels.

In fact, experts have stressed the need for management and staff of organisations to always weigh theeffects of uncertainties on their objectives when making decisions.

In Nigeria, since the last banking crisis that saw the intervention of the banking sector regulators in some of the financial institutions, a lot of them have continued to take measures that would ensure that they remain sound, especially with an increasing number of the banks focusing on growing risk management culture. But beyond the banks, experts have stressed the need for operators in other sectors such as manufacturing, oil and gas, among others to also imbibe effective risk management culture.

They made this call at a “Fundamentals of Risk Management Training (FoRM),” that was organised by the Risk Management Consulting Limited (RMCIR), in partnership with the UK Institute of Risk Management, that took place in Lagos recently.

To the Managing Partner, RMCIR, Mr. Robert Mbonu, the importance and priority attached to risk management are due to its direct linkage with organisation or business objectives.

He pointed out that every organisation has objectives, just as he noted that risks are the effect of uncertainties on such objectives.

Mbonu explained: “This effect could be positive or negative or a combination of both depending on the circumstances.

“Therefore, a sound understanding, and knowledge of risk management, presents users with the tools and skills to manage these uncertainties in a structured way.

“This management science has become a competitive advantage used by well managed businesses to lead and outperform peers in any industry.

“Risk management maturity in an organisation speaks to how well it is embedded in the culture, and decision-making process.

“For its successful implementation, there must be buy-in at board level, and it must be driven from the top.”

On his part, the facilitator at the training, Mr. Joachim Adenusi, who is a Fellow and former Director of the IRM UK, noted that individuals and organisations were becoming more aware of the benefits and importance of risk management.

“To take it back a bit, risk management started from where the auditors or the chief financial officer would be concerned about fraud or internal control and so they would set up an audit team to investigate and control things.

“But with time, you would find out that the essence of risk management is not to control things but the reason you manage risk is to enable things to happen.

“So, you set out your goal as a business, you have a vision to achieve and if in a few months the vision dies and the business dies. Repeatedly, what happens in Nigeria is that most of the businesses are not sustainable and the reason why they are not sustainable is that sometimes people don’t understand the terrain, contest and the risk and the issues.

“So, businesses are beginning to think that they need to understand the issues ahead of time and then are able to put some measures in place or actions to prevent or create backup plan then maybe the business would stand a test of time.

“So, it is about survival. In an environment where it is harsh itself, where you can’t get loans easily or infrastructure is available, or the government is backing you. So, most business people are also looking to do something for themselves. Also, in Nigeria, we have seen collapse of financial services companies so many times and the regulator is now saying this cannot happen again. So, in order for that not to happen, we need to bring this skill in.”

Adenusi, who is the chief executive of Conrad Clark, pointed out that presently, financial services and businesses are waking up to the importance of risk management, just as he pointed out that there was need to also enforce risk management in the public sector.

“I think the next phase we are going to get to, is a point where the government would wake up to say we need risk management in government institutionsalso. And when we start getting to that place, you would start seeing human lives being protected, capital being protected, hazards being protected, opportunities being enhanced and innovations.

“So, what the government should be thinking of is, if they are making promises to the electorate and to the citizens that they are going to build schools, houses, etc, proactively, they should also be thinking of what theyneed to put in place to ensure that those promises they are making are realised”, he stressed.

He further added: “Risk management would become a vital stool and one of the skill set that would help the government to deliver promises and objectives and the more they deliver on their promises, their backing would get stronger because the public would always react to performance.

 “So, the government should start thinking about adding these skills to other skills they have. So that they help them to proactively prepare not reacting and it would help to foresee threats and opportunities.”

Enterprise Risk Management

Also commenting on the importance of Enterprise Risk Management, Mbonu noted that every organisation is faced with different kinds or risk. These come under various headings depending on the area of the business affected, such as market, regulatory, operational, cyber to mention a few.

“While each of these risks can be monitored independently, this mode is considered suboptimal and is referred to as dealing with the risk issues in silos.

“Enterprise risk management therefore over rides the silo tendency of managing risks.

“It is the act of dealing with the entire universe of risks and managing same in a holistic manner under a carefully designed framework. By so doing, all the bases are covered, thereby providing assurance to the business owners that every foreseeable uncertain angle is covered. This is the way to go,” he said.

Capacity Building

Clearly, every organisation is in business to make profit, and by so doing, add value to its stakeholders. Adding value can only be achieved if strategic objectives are met.

Therefore, to guarantee that such strategic objectives are met, staff must be equipped with the knowledge and skills of knowing how to identify assess and prioritise the various risks or traps that stand in the way. This takes a measure of learning.

The skills must be ingrained in the operators and drivers of the organisation to the level that it becomes a culture.

The UK-based IRM is a global leader in the risk profession through education and lifelong learning.

“RMCIR, working in conjunction with the UK IRM, made it possible to train operators and boards locally in Nigeria, thereby saving delegates the cost of traveling to the UK.

“This gives Nigerian operators the opportunity to learn about ERM at a rate that is cheaper and more affordable.

“The Fundamentals of Risk Management course was designed to equip participants with the skills, knowledge and tools to embrace opportunities, and navigate the risks and obstacles that exist in every enterprise.

“The tools and methods learned in a practical easy to understand format, will hone the skills of participants, and that of teams to spend more time chasing the things that matter most for the organisation.

“While at the same time being on the watchout for those risks that can prevent objectives from being met, this course can be customised and made bespoke for in-house delivery,”Mbonu said.

Apart from the knowledge gained, the RMCIR boss said participants will benefit from it by having a globally recognised certificate of attendance issued by the IRM UK; automatic affiliate membership of the Institute, with access to a plethora of online risk management resources; join a global network of risk practitioners, among others.

 To the Director of Programme IRM, Mrs. Laide Abel, the training was organised in order to strengthen capacity in the area of Enterprise RiskManagement.

“To a lot of people, Enterprise Risk Management is still like a black box and they think it is a mysterious thing that only certain people who are the risk officers can understand.

“But we realise that risk is something you deal with everyday, so we thought we should bring to the level where everyone can understand what risk is all about, and they can understand how to manage it and how to maximise the opportunities that they come across in their careers and in the personal lives.

“This is a programme that everybody should attend whether you are in employment or you have your own business It is programme that everyone should attend. And the great thing about this particular program and what sets it apart from other risk management programs is that it is from the IRM, which is one of the globally acclaimed risk management institutes.

“So, we decided that we wanted to bring the quality of an international training here to Nigeria, so that people would be able to afford same quality of training without having to spend a lot to travel to the UK,” Abel said.