In the ever-changing business environment, encountering risk is inevitable. The ability to manage these increasingly significant risks now represents the difference between a thriving organisation and one that is struggling to deal with the challenges facing it. Many businesses in the region have realised that misunderstanding risk can lead to disaster. The organisations that have dealt with the recession most effectively have realised that this requires extensive knowledge of risk management tools and techniques.
As the current worldwide situation demonstrates, poorly informed or improperly executed risk management can mean disaster . Most organisations have now realised that much more is needed and have developed an Enterprise Risk management (ERM) approach.
This has ensured that risks that were previously managed in isolation can be aggregated and prioritized across the entire business. Advanced ERM goes one step further. Risks are scored based on business materiality with each risk being evaluated and compared by its financial, legal, reputational, and regulatory impact, and classified by the effect they could have on the business. New understandings of risk emerge, and efficient controls can be implemented to tackle what really matters to the business. And drive competitive advantage.
In short the focus becomes strategic risk management.
Upon completion of the Advanced Enterprise Risk Management course, participants will be able to:
Generate measurable value by aligning the ERM framework with corporate performance expectations
Implement appropriate and varied techniques for the identification and assessment of risks
Engage the Board in the analysis of enterprise risk scenarios
Foster a culture that reinforces appropriate risk-taking to balance value creation and value protection
Clarify ERM accountabilities of all employees from executives to the front line
Implement key risk indicators (KRI’s) for each line of business
Develop risk appetite statements and apply risk tolerance techniques
Enhance achievement of corporate objectives by linking performance targets, and risk management actions
Risk managers
Managers and Directors responsible for the risk management function or process
Heads of Internal Audit
Internal Audit managers and senior auditors
Heads of Assurance functions
Senior Finance professionals
Senior project managers
Our diverse instructional approaches ensure effective learning:
– Lectures & Presentations: Engage with expert-driven, stimulating content.
– Course Material: Access well-crafted supporting resources.
– Group Work: Collaborate on discussions and case studies for practical insights.
– Workshops & Role-Play: Participate in immersive, scenario-based activities.
– Practical Application: Focus on applying theoretical knowledge in real situations.
– Post-Training Support: Receive extensive support after training for skill implementation.
Characteristics of an advanced ERM process
Board-level commitment to ERM as a critical decision framework
An ERM culture that encourages full engagement and accountability at all levels of the organization
Engagement of stakeholders in risk management strategy development and policy setting
Transparency of risk communication
Integration of financial and operational risk information into decision making
Identification of new and emerging risks using internal data as well as information from external providers
A move from focusing on risk avoidance and mitigation to leveraging risk and risk management options that extract value
New paper on ERM and the role of Executive management will be shared
Exercise 1 – The challenges involved
Extreme risk events
information and the Covid 19 virus have shocked the world
Triggers for extreme events
Awareness of external trends – key risk indicators
Determining a practical plan- it is not possible to plan for everything
Identifying principal risk factors (case study)
Understanding of third party risks
The domino effects – mapping the impacts
Crisis response capability
Allocating clear roles and responsibilities
Post crisis review – collection and analysis of data and actions taken
External reporting
Learning from others – keeping up to date
Risk register for extreme events
Exercise 2 – Extreme risk management
Risk Attitude
The need to define risk as the need to get things right – not what can go wrong
‘Ring fencing’ risk exposure – never allow one part of the business to impact the whole organisation
Determining and communicating your attitude to risk and your required risk culture to managers and stakeholders
Recognising that reputation is both your biggest asset and the biggest risk you face – and one you cannot insure
Not waiting until you are required to provide evidence of effective risk management by regulators or legislation – this will usually be too late
Exercise 3 – Enforcing a risk attitude
Key risk indicators (KRI’s)
Identifying these in advance
Examples of KRI’s
New KRI guidance
How to develop effective KRI’s
Exercise 4 – Identifying KRI’s for all key risks
The Risk register challenges
Why the ERM process often fails to engage management
Risks recorded are much too general
Causes and effects are confused with risks
Only residual risk is concentrated on
Various different methods are used for scoring risks
Benefits are difficult to determine
The process is far too complex
The Risk register solution
Start with the business objectives
Record the risk events
Assess the inherent risk
Identify the cause or causes for each risk
Determine an accurate position for the process to mitigate each cause
Assess the residual risk
Determine any areas of risk exposure (or opportunity)
Develop an action plan to deal with each exposure
Determine a target for each risk
Exercise 5 – The advanced ERM risk register
Risk appetite
What is risk appetite
The difference between risk appetite and risk tolerance
Defining risk limits
Risk profiling
Developing risk appetite statements
Examples of risk appetite statements
Exercise 6 – Defining risk appetite for all business activities
ERM risk measurement techniques
Risk workshops
The power of workshops
Techniques for successful risk workshops
The need to involve peer groups
Establishing a risk workshop
Facilitation techniques
Exercise 7 –Risk identification
Delphi (expert analysis)
Getting consensus from experts of different backgrounds and perspectives
Comparing the opinions of qualified experts from different fields
Determining acceptable risk by using experts to assess e.g. total credit given versus credit available or to establish creditworthiness criteria
Worked example
Exercise 8 –Delphi analysis – the mystery
Ishikawa (fishbone) analysis
Very effective in evaluating risks with multiple causes
Steps in fishbone analysis
Problem identification
Primary and secondary causes
Establishing priority criteria
Preparing fishbone diagram
Analysing the output
Exercise 9 – Ishikawa exercise – loss of key personnel
Monte Carlo simulations
Mathematical technique that allows people to account for risk in quantitative analysis and decision making.
Provides a range of possible outcomes and the probabilities they will occur
Determines a probability distribution
The types of distribution
Normal (bell curve)
Uniform
Triangular
Uses of Monte Carlo simulations
Used to price complex financial instruments
To determine the VAR (value at risk)
Determining the option to expand, contract, or postpone a project
Exercise 10 – Monte Carlo exercise
Bayesian networks
Bayes theorem
The risk events where the probability of one event is conditional on the probability of a previous one
Adding more data to an original idea to enhance decision making
Use of Bayesian networks
Weather forecasting
IT network failure
Medical diagnosis
Emergent risks
There is no clear boundary with other types of risk
Emergent Risks cannot often be easily anticipated
At early stages they are often low probability / high impact
Areas for consideration
Political
Regulatory
Legal
Security
Technology
Environmental
Knowledge
Exercise 12 – Team Exercise to enable you to appreciate the emergent risks
ERM and decision making
For every key proposal passed to the Board or senior management for decision, insist that a full risk analysis is submitted
Match key risks to corporate objectives each year.
Ensure that you under promise and over perform – not the other way round
Invite all your key stakeholders to a risk workshop
Analyse the major surprises and near misses that you have had in the last 12 months
Recognise that ‘if it seems too good to be true’ it probably is
Prepare media statements in advance to cover all possible crises
Twice a year ask all key executives to identify 3 opportunities and set up a high level workshop to discuss and prioritise them
Develop a corporate opportunity register
Offer special incentives for the best ideas to reduce risk or exploit opportunities
Exercise 14 – Exploiting Opportunities