What should risk management look like moving forward?

What should risk management look like moving forward? | Insurance Business America

Risk Management News

What should risk management look like moving forward?

RiskNZ chief executive David Turner breaks it down

Risk Management News

By
Terry Gangcuangco

“When we stop looking and stop challenging and stop digging down, that’s the biggest danger, because that breeds more risk.”

Those were the words of RiskNZ chief executive David Turner (pictured) when he sat down with Insurance Business to talk about the future of risk management and how he believes leaders should approach this function for optimal outcomes.

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Managing risk from the top and across the board

In Turner’s view, risk management is directly connected with a company’s leadership, in that how much appreciation is given to risk management from the top is crucial.

“Leadership is the biggest influencer for risk management now,” Turner asserted. “If leadership doesn’t understand how important it is, then it won’t get the right attention, won’t get the right money, won’t get the right funding.”

More importantly, according to the RiskNZ CEO, it is the leadership’s understanding that will lead to the big questions that need to be asked.

“If leadership doesn’t understand how to read risk management reports and challenge them, then risk management can be skewed the wrong way,” he said. “Leaders need to understand risk management across the board and not just pay lip service to it anymore.”

Turner pointed out that, while risk management teams have the experience and expertise, leaders can’t just blindly rely on them to steer a company’s direction.

“They need to almost know as much about risk management as the risk management teams in the organisations to actually make calculated logical decisions,” Turner declared. “If they don’t, then they’re only moving forward on what they get told.

“And that only comes from usually a small department or team within an organisation looking after risk. Effectively, that little risk team is then navigating and deciding the course of that organisation because people are just taking their advice on board and not really understanding everything about risk management.”

Risk management: questioning and challenging

The chief executive clarified that it’s not an issue of trust or competence, more than it is a matter of ‘checks and balances’ and thoroughness.

“Good risk management is two things,” Turner told Insurance Business. “It’s questioning and it’s challenging. That’s real risk management. A third thing would be good communication. We don’t do enough challenging or questioning of how things are decided in risk management, why they’re decided, and why we choose sometimes the mitigations or pathways we do.

“A lot of times we’ll just take that on board and say it must be correct, and then we don’t have enough challenge to make the right decision. We need to look at it more closely. It might be uncomfortable for some, but this is how we do in really good consultancy – we go in and we challenge the status quo and make sure everything is coming out of that.”

He went on to explain: “In some organisations, their risk managers and teams have a broad understanding of what they should be looking for, and they look at all the risks and issues they can from point A to point Z, and they prioritise what they should look for and they do it really, really well. Other organisations may not have that broad understanding.

“So, the best thing we can do is ask and just make sure that they are following the right track, they are looking at the right things, and any kind of concerns or queries are being met. That’s not being threatening or anything else; that’s just making sure that there’s a bouncing board… That’s all it is – it’s a check and a balance – but we need more of that as we move forward.”

Risk managers as effective communicators

On the risk managers’ end, Turner pointed out the need for them to be effective communicators as part of their remit.

“It’s not enough to be a really good risk manager, be able to provide reports, do good assessments and pass them up,” he said. “That’s only half the battle. You now have to know how to articulate risk management to everyone in that organisation, have to know how to gently educate them on what it means, how they can use it, and what they should be looking for and asking.

“Also, you should be writing it in a way where people can easily understand it in layman’s terms of exactly what you’re getting across, what the real risks are, so they have opportunities to look at that and ask questions back. The biggest risk we have in some organisations is the risk management team itself, where they make it overcomplicated and people can’t understand it.

“The less we understand about something like risk management, the less questions we’ll ask and the more we’ll accept. Then when we do that, we miss opportunities and we don’t get exactly where we need to go. It’s not making everyone in the organisation an expert, but it’s certainly making sure that there’s a habit of good risk management conversation and everyone appreciates it for what it is.”

In a very complex world where everything’s changing, Turner believes a risk manager’s job will be easier if they get to know as much knowledge as they can as possible, while ensuring that they’re able to communicate that knowledge.

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