Evolving risk management

Sarah Draper at Telehouse argues that to create new opportunities, risk management processes need to pull down the silos across organisations

 

The way organisations approach risk management is changing. Where dedicated risk departments once worked in silos to reduce, pre-empt, mitigate and manage challenges which affected the entire business, current risks can no longer afford to sit on the shoulders of one group.

 

With the multiplying physical risks and the nature of risks in the virtual world (such as cyber), such compartmentalisation offers a narrow view of the threats, preventing every employee from fully understanding  their role in risk management to enable companies to adequately address and manage their risks.

 

Not a one-person sport

As businesses evolve, both digitally and socially, risk management must keep pace as traditional approaches become ineffective and redundant in the face of today’s complex risk landscape. Given the high reputational and financial stakes, organisations need to realise the importance of fostering cross-departmental collaboration to identify and minimise a whole array of risk dimensions. From political and macroeconomic to health and safety, sustainability and data privacy, risks must be managed across the business, with every stakeholder aligned to manage them.

 

A great example is cyber risk. Ongoing hybrid and remote working combined with the adoption of new technologies and connecting IoT devices means more entry points for opportunistic cyber attackers.

 

This does not, however, mean that only CIOs and CISOs are responsible for controlling data risks or keeping critical information safe. As almost every department will use technology and handle some form of data, the responsibility to manage that risk needs to be shared across the business. And it’s crucial the entire business buys into that responsibility and understands their role in keeping their business safe.

 

Bringing together disparate functions within the business is critical to understand the interrelationships and identify risks between different business areas. Such a cross-divisional lens and the ability to join up the dots is essential to prevent triggering a series of negative impacts of one risk on other departments. It also ensures an alignment between the identified risks and the organisation’s strategy, as well as create a more dynamic and agile response to the changing risk landscape.

 

Balancing risk management with customer experience

As with all critical decision making, businesses need to consider how managing risks will affect customer experience to strike the right balance between risk management and customer expectations. With organisations increasingly adopting new technologies, data and cyber risk is once again a good example to illustrate the point.  Whilst some customers may want to see and feel the security layers, others might prefer priority was given to the ease of use, speed, or convenience.

 

Most people for example might be okay with layers of security in their banking applications to protect their money, but may not be so accepting with the same protocols to watch their favourite films on their digital platforms, or listen to their music streaming service. Get the balance wrong in either direction and businesses risk losing customers.

 

In the case of data centres, like Telehouse, physical security is top of the list for enterprises wishing to house their IT infrastructure. Customers want to see clear security measures like access controls, perimeter fencing and CCTV. A one size-fits-all approach to risk and security management simply doesn’t work.

 

Turning risk into opportunity

Risk is an uncomfortable yet important conversation to have with everyone across the business. However, the discussions around risk management do not have to induce immediate fear if they are also focused on the opportunities managing risk well can bring.

 

Let’s look at environmental, social, and corporate governance (ESG) risks as an example. As they impact environmental management practices, working conditions, compliance with relevant laws and regulations, and much more, their significance cannot be understated. Business leaders tend to see ESG and sustainability risks as needing strict controls as getting it wrong   can harm their reputation.

 

And in part, that’s true. However, what many often fail to see is the opportunities to improve reputation, improve working practices, efficiencies or even influence regulation for the better, all of which can result in gaining a competitive advantage.

 

These are the powerful conversations that modern risk management teams can help bring across the business and broader industries through being passionate, curious, and aware of the changing world around them.

 

Innovation continues to push regulation

Shifting away from traditional risk management approaches and embracing a more proactive, collaborative model is slowly starting to unravel how much the current regulations are falling behind. Businesses are progressing with digitalisation and innovation projects, and often find they’re leading the way, with regulations following later.

 

Technology moves at a faster pace than regulators do, which often means delays and lack of clarity in how to safely adopt new tools whilst remaining compliant. At the same time, of course, too much regulation can hinder the growth of individual businesses and the economy, so another balance needs to be struck by risk managers.

 

As technologies such as artificial intelligence, machine learning, big data analytics, distributed ledger technology and the use of IoT devices continue to disrupt traditional business models and embed themselves further into the workplace, it’s crucial businesses take an inclusive and collaborative approach to managing risks.  This will result in informed decision making.

 

The risk management landscape will continue to change, and as such, the risk management department can no longer stay in a siloed shadow.

 

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Sarah Draper is General Counsel and Chief Risk Officer at Telehouse

 

Main image courtesy of iStockPhoto.com