Page 65 - IRMSA Risk Report 2021

4.3 STATE OF RISK MANAGEMENT

THE PURPOSE OF RISK MANAGEMENT

The purpose of the risk management function has not changed. Risk management continues to support risk-informed decision-
making through the prioritisation of threats and opportunities, so that leadership can focus on taking the right risks to achieve
organisational objectives. However, the way in which the risk management function should be performed has evolved. Consequently,
the competencies that are needed for effectiveness must also progress.

The spotlight is on risk management and the opportunity should not be wasted.

In 2021, the spotlight will remain on risk professionals who have learned in 2020 how quickly a health crisis can turn into a socio-
economic crisis. The Covid-19 pandemic has catapulted the role of the risk professional, which gives risk professionals a stronger
voice than ever before in influencing the strategic direction of their organisations. The onus now rests on risk professionals to rise
to the occasion and engage executive leadership with a view to helping organisations take more of the right risks needed to rebuild
the economy and help the country to succeed.

After 9/11 and the 2008 Global Financial Crises, many organisations turned to the formal discipline of risk management. However,
the discipline of risk management was often not sustained and stalled after a while. We cannot allow it to do the same after
Covid-19, and we must use the current context as an opportunity to develop robust and resilient risk management as a country – as
institutions, as industries and as organisations. The challenge for government, industries, organisations and risk professionals is to
overcome the challenges we are facing as good stewards acting on behalf of future generations. The next shock will happen – we
are just uncertain of its timing, nature, and impact.

In a 2019 survey before Covid-19, it was found that:

• 59% of business executives believed that the volume and complexity of risk is increasing extensively over time .
1
• 68% of organisations had recently experienced an operational surprise due to a risk they did not adequately anticipate.

• 31% of those surveyed said that they have a complete risk management process in place – and a mere 23% described their risk
management as “mature” or “robust”.

• Fewer than 20% of executives believe that their risk-management processes provide an important strategic advantage.

• Just 26% said that their board substantively and formally reviewed top risk exposures when discussing the organisation’s
strategic plans.

• Only 21% of board members believed their organisation was “very prepared” to respond to an adverse risk event like the
Covid-19 pandemic .
2

Organisations know that risk is an enterprise threat, yet many are not adopting an enterprise-wide approach to managing it.
Perhaps the issue lies in how governments and organisations perceive the value of risk management.

As the unseen coronavirus pandemic continues, and as the overreactions and underreactions of governments continue to cause
prolonged disruption in nearly every industry, risk management is under the microscope. But it could, in future, be in the dock.
Socio-economic and business success is more critical than ever before, and governments and organisations may finally be ready
for proper and widespread risk management implementation.

1 North Carolina State University’s Poole College of Management, State of Risk Oversight Report, 2019.
2 E&Y, Global Board Risk Survey, 2020.

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