Risk Management

MANAGEMENT & ACCOUNTING

Embedding Risk Management Practices for

Improved Organisational Performance

Patrick Ow

Improving business results require risk management practices to be simplified and embedded seamlessly into normal business operations, planning and budgeting processes, and organisational culture. It is no longer an add-on or a management fad. Private and public sector organisations alike have struggled to understand risk management implementation steps and techniques. For those who have overcome it, they are reaping the fruits of their labour.

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igh performing organisations, having developed strategies through a sound strategic planning process, must ruthlessly implement strategies by removing performance barriers or risk through enterprise-wide risk management practices. Organisations can implement their strategy and perform well if: Everyone understands strategic, unit and departmental objectives, measures and targets and key priorities (clarity). Everyone is connected emotionally and engaged to strategic themes, key objectives and organisational priorities (commitment). There is clear “line-of-sight” for each individual, department, and unit so that they are closely aligned to the organisation’s key priorities (translation). Structure, system and cultural barriers are removed through embedded enterprise-wide risk management process (enabling). Everyone works together to arrive at better ways to achieve objectives and targets, removing “its not my job” thinking (synergy). Individuals are responsible for achieving targets (accountability). Everyone is a de facto risk manager (responsibility).

Risk is the likelihood of something happening (either positive or negative) that will have a consequence or impact (arising from the event) upon the achievement of objectives. Risk management standard AS/NZ 4360:2004 defines risk as “the chance of something happening that will have an impact on objectives”. Risk = Likelihood X Consequence Like the...