Organisational Risk

Can be divided into 2 categories

i) financial (includes credit, market, liquidity, capital, stress testing, profitability, etc)

ii) non-financial (governance, operational, technological (like cyber, etc), climate, conduct, compliance, regulatory, reputational, human resources, business interruption, projects security, financial crimes, etc)

Linked with this is deciding

"...- how much risk are you willing to take?
    - what is the organisation's tolerance for risk?
    - is a particular project inside or outside that range of tolerance?..."

James Frost 2019

Need to be careful of institutionalised isomorhpism (uncritical emulation of practice, ie just because somebody else is doing it, you can do it)

Many organisations are facing more non-financial risks and nimble competitors. Before the GFC, the risk functions focused heavily on reporting. This has now changed with more focus on understanding the current and future risks, and an organisation's capability and culture. In Australia the regulators are stressing self-assessment in the areas of governance, accountability and culture. However, there are challenges in measuring and analysing risk culture.

Advances in technology and artificial intelligence are expected to be of use. Thus

"...looking for a specialist in emerging risk areas like cyber, and people with skills in data and analytics and technology......from behavioural scientists, analysts, organisational psychiatrists, educators - the risk professional of the future will have a very different and diverse skill set..."

Nigel Williams as quoted by James Frost

There is concern about some risk management theory like the 3 lines of defence, ie a structure to follow the managing risk, ie

"...the first line of defence is staff with customer contact, the second line is a risk department and the third line is the auditor..."

James Frost 2019

There is a need for a fourth line of defence, ie regulator or external auditor.

Linked with risk is understanding the personality types, eg

"...Many bankers show evidence of the 'dark triad' of personality traits - Machiavellianism, psychopathy and narcissism......are the very trapping of the banking world - such as money, power and success - means people who exhibit these characteristics often self-select into the industry..."

Alessandra Capezio as quoted by James Frost 2019

 

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