If you are leading a company today, your buy-in into risk management is paramount in determining the extent of value your business could optimize amidst the very dynamic and uncertain market outlook for most industries.
Leveraging the power of data analytics for valuable risk intelligence, for example, demands vital participation from CEOs to be effective, as advised by Mark Steger, a Risk Transformation Director from PwC Brisbane, in his article about the practical and crucial roles CEOs could play in mining risk intelligence to protect and possibly create business value.
From this article, Principle No.1 alone on CEOs ensuring risk analytics are led by business insight - though it sounds simple or cliche, could steer the data-mining system development towards churning out more 'breaking news' insights rather than just 'evening news' reporting information.
Sometimes, all it takes is one good insight to propel an organization through its next breakthrough point.
But what does buy-in into risk management really mean? What does strong leadership in an organizational risk culture look like? Let me share with you a risk culture transformation journey of a great coach and sponsor in my earlier corporate career, Ir. Pau KH.
It was my first few days of joining this multi-billion-dollar company when I was sitting in on a risk steering committee meeting he was chairing as the COO of the organization at that time.
The risk conversations were not flowing very well since the beginning of the meeting with the Chairman openly expressing his doubt about the overall Risk Management Department (RMD) team's capability.
There was not much buy-in and the trust level in the RMD team was low at that time. It could be due to different personal beliefs about what risk management should be, or it could be that risk assessment had always been embraced more as just part of compliance to tick off the checklist for a mega manufacturing complex like this organization.
Anyway, the meeting did not end favorably and the overall feedback received was far less than encouraging. But the RMD Head responded quickly and positively by leading the entire team to buckle up on our internal risk capability while doubling down on tying risk management processes and activities back to the business bottom line.
One of my assignments following that was to design and drive a risk culture program to re-align the entire organization, starting from the top. For those of you who have known me long enough, you know this is one of my happy creative spaces - designing tailored behavioral-change programs.
With the support of my team, I drove the Lemon-themed risk savviness campaign with programs and activities targeting different working levels from the top management to the operational front liners, tailored to the nature of their work respectively.
We constantly engaged the COO to get him involved in the risk management transformation initiatives and let him be at the center of the transformation journey for the entire organization.
Within the first year, the same COO who was later promoted to the company's CEO became the strongest risk champion for the organization. He became the one who always told his GMs under him, saying, "Bring this to the risk team first, I need to see the exposure and a workable mitigation plan," whenever they came to him with any proposals.
He even established a regional hub committee beyond the company to improve the performance of the entire business value chain, collaborating with the company's suppliers and marketers, as a result of mitigating top enterprise risks. Through deliberation at that hub committee, he led the company to exceed the business target set for that year by hundreds of millions of dollars.
That is the real business value that a strong and practical risk culture can help your organization to stretch its business performance, year after year. Don't limit risk management to just compliance or good on paper.
While the role of the Risk Management team in any organization is important in providing credible risk advice to the top management, we can't discount the importance of risk ownership and strong risk culture (the right belief) from the very top, which, I believe, has the greatest leverage to steer the entire organization towards a stronger bottom line.
As always, these are my personal take on risk management. I am keen to hear yours. If you have any questions or thoughts to discuss, leave me a comment or write to me.
That was Ir. Pau KH slicing fresh lemons to make us lemonade, in place of ribbon-cutting during the launching ceremony of the Lemon-themed Risk Savviness Campaign I was driving, together with my Risk Management Department Head (second from the left) and the management team.