Page 68 - IRMSA Risk Report 2021

2. ROBUST DECISION-MAKING CAPABILITY

USING RISK MANAGEMENT AS A DECISION-MAKING TOOL
Organisations must develop the competence to use risk management as a decision-making tool and not merely as a compliance
tool. Unfortunately, many organisations continue to lament that their risk-management processes do not provide a competitive
advantage and are not a helpful tool for decision-making.
An organisation’s governance policy should ensure that the organisation is making the best decisions possible and, to this end,
directors and executives must demand more than a risk register, a report, or a heat map. They need to ensure that a structured
process exists for improving the quality of decisions and the avoidance of costly errors at all levels throughout the organisation.

SYSTEMATIC DECISION-MAKING
Risk management has its origin in the decision-making sciences. Organisations must have a systematic approach to decision
making, using proven tools and a structured communication process. This must be applied to generate, evaluate, and compare
alternative decisions and options. Good decisions must be underpinned by a good decision-making process.

PROACTIVE DECISION-MAKING
A proactive – rather than a reactive – approach to decision-making is an essential capability, especially in uncertain times. The
competence to know and apply tools to make good decisions quickly is essential. Proactively identifying threats and opportunities
for strategic objectives, instead of merely reacting to events or issues as they arise, is a key distinction between traditional risk
management and enterprise risk management.

SPEEDY DECISION-MAKING
Times of crisis demand speedy decisions, but also a complete rethink of an organisation’s managerial modus operandi. This
involves more than simply speeding up existing processes. It calls for the creation of entirely new procedures.

CONTINUAL REVIEW AND LEARNING
Operating under conditions of extreme uncertainty turns an organisation’s operating imperatives upside down. A constant
review of assumptions is needed. Instead of merely planning the work and working the plan, managers must be competent in
comprehending and responding to dynamic and stressful change.

The cycle of learning from mistakes, recalibrating, and redesigning must take place continually to ensure that responses are
reflective of the unfolding situation. Tenacious questioning of established assumptions, especially those based on ideas adopted
under conditions of extreme uncertainty and pressure, is needed. No assumptions can be treated as sacrosanct. Organisations
should accept when they are wrong, recalibrate, celebrate quick learning, and move forward.

SEEK EXPERT ADVICE
Where specialised knowledge is needed to make informed decisions, expert advice should actively be sought. The value of
internal expertise, for example in risk management, should be actively engaged. Proposed solutions should be systematically
challenged and, where required, external/independent advice should be part of the decision-making process and part of
improving/providing assurance. Managers and risk professionals should be encouraged to shoot holes into proposals, but this
should be done in a constructive manner.

BOLD RISK-TAKING
Executives and managers should be empowered and encouraged to take bold, speedy actions that would normally feel risky,
based on whatever information is available at the time of making the decision. The counterbalance is that, as competence is
developed in making fast practical decisions, decision-makers should readily be prepared to shift the course of action if the
situation changes. We should bear in mind that King IV encourages responsible risk taking and, being risk averse, leaves value on
the table.
3 The King IV Report of Corporate Governance in South Africa, 2016.

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