Using risk appetite statements as a tool to understanding your organisation is key to managing complex risks, says Gareth Byatt, principal consultant at Risk Insight Consulting and the Institute of Risk Management’s Asia-Pacific ambassador ahead of Risk Forum Asia Pacific.
Risk managers who are not engaging with every level of their organisation are at risk of missing the big risks, according to Gareth Byatt, principal consultant at Risk Insight Consulting and the Institute of Risk Management’s Asia-Pacific ambassador.
“As a risk profession, we should be making sure that we’re talking to lots of different people from the C-suite through to operations and frontline managers. If you’re talking to them and having simple discussions about risk you will pick up on important things. That’s the good thing about risk appetite.”
“What is a board thing? What is an executive thing? What is a manager thing within the business? Whether it’s a frontline worker thing and the tasks that people are doing, it’s a really simple thing to be able to say, ‘What’s your appetite for risk in this area?’, said Byatt.
Byatt also stressed that no one voice is more important than any other in an organisation when it comes to risk appetite.
“Speaking to everyone is important to make sure that they’re aligned. As a risk team, one of the things that you should be doing is talking to people across your organisation because normally you’re one of the few functions that can actually do that, therefore, you should be making sure that what board and execs think is aligned all the way through to front line.
“Now, whilst the board team might be thinking about things like gearing and liquidity ratios and their overall strategy, I still want to link up with the kind of risk that people are taking, because they are taking it. And if you don’t help them to get alignment, you aren’t doing your job well as a risk manager,” Byatt added.
Byatt said a classic example of a lack of internal risk appetite alignment is the VW emissions scandal. “It’s about transparency and visibility. And of course that comes back to this cultural piece, because if you’ve got a good culture then people will have those discussions. If you’ve got bad culture it’ll be hidden and you’ve got elephants in the room.”
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