Getting ‘your stability pillars right’
It’s nice to be back with the ‘Business Times’ once-more after some years. When I first penned the column in 2007, the enterprise landscape had one more dreadful challenge up against commerce – the war of 30 long years.
Urban terrorism affected the metropolitans where most of the premier corporates of the nation are located – and territory terrorism affected the countrywide market in varying degrees by way of combined negativities and wobbly uncertainties. Certain industry segments faced pressure of war and certain business localities faced destruction by terrorism, and on the whole- all segments suffered more or less in the mayhem.
In the aftermath of the dawning of peace, we were gifted with a greater breathing space to focus our minds on deeper business risks with a certain notch of solace. Thus, objectively focusing on managing business risks is an essential need for any responsible enterprise – whether it operates globally- regionally – nationally or provincially.
President of Goldman Sachs and investment banker Gary Cohn could not have been more precise when he stated that ‘if you do not invest in risk management, it does not matter what business you are in – it is a risky business’. The insight he advents on us punches-in a powerful message. That is – no matter what industry, what scale, what geography or what competitive contouring that we are into – the correct management of enterprise risks is a dynamic mainstay of sensible and responsible corporate governance.
It is constantly encouraging to see that some corporates are very serious about enterprise risk management in order to bridge the gap between vivid annual report compilations against the tangible risk posture of every corner the business.
Yet, there are others who seem to have misinterpreted or are yet to capture the enterprise risk management domain in totality. Thus, their flawed grasp is that risk management is limited to finance, insurance or in some cases to data technology or information system.
In such fractional risk managing approaches, an enterprise might be shielded to a certain extent which is still good, yet elevating it to a ‘holistic risk managing thrust’ is the best fit mode to reach healthier business solidity – amidst adverse eventualities.
Enterprises may sprout with humble beginnings, yet the eventual growth gives them greater obligations. Together with ever widening spectrums, there comes the constantly increasing multi-layer accountability. It is the answerability for the solid existence of the business itself – and for its fiscal stakeholders, employees, service partners, consumer base, regulatory decrees and the state to name a few. Certain accountabilities are direct and legality linked – while others can be morally piercing.
Apt risk posturing of an enterprise is essentially a top-down phenomenon. It therefore requires a great deal of unpretentious motivation, objective time, tireless energy, concerted effort and rigorous follow up – on the part of the top tier management team.
Once the managing mechanism is set (which can be considered as winning half the battle), it then is easier than previously to set the base for a robust holistic risk management drive across the organization, addressing the four dominant risk layers of your enterprise, notwithstanding the magnitude:
- Conceptual Sphere
- Strategic Sphere
- Procedural Sphere
- Application Sphere
Deliberate or oblivious slackness in any of the above inter-knitted and inter-dependent spheres can cost the enterprise – sometimes beyond belief of the very people who displayed indifference before. There are numerous real life case points where certain top-notch enterprises got completely wiped-out from the entrepreneurial landscape.
Such illustrations injects the business wisdom once more that there is hardly a logic trying to be wise after an enterprise disaster – whether it involves human capital, corporate assets, fiscal equity or desired market presence. Risk culturing across the enterprise is a challenging initiative nonetheless. Allianz chief risk officer Tom Wilson once said that ‘risk management is a culture, not a cult. It only works if everyone lives it, not if it is practiced by a few high priests.’ This is true for an enterprise of any scale – yet larger the magnitude and the spread of an enterprise – more daunting it is to convert the preaching into action – and to eventual end to end culturing. Nevertheless, some well driven organizations show us that it is finely within the feasibility.
Unseen and unforeseen business risks are in aplenty. The million dollar question is how to be armed to walk the extra mile? Let us contemplate further in upcoming columns.(The writer is a foremost enterprise risk management specialist and a corporate risk trainer who serves as the CEO of Strategic Risk Solutions. He can be reached via eMail on solutions@sltnet.lk)