Posted by Robert Half on 20 April 2015
There are many things that keep the executives running our businesses awake at night. If there is one word that sums it up though, it is “risk”. Risk is what makes even the most fearless executives toss and turn in their sleep but it still means different things to different people. Despite the variations though, there are common business risk themes running through virtually every industry at the moment. Regulation and the risk management around it is a topic that dominates board meetings, conversations with risk managers and industry surveys amongst businesses.
Pressing concerns for risk managers
The risk managers appointed by executives are naturally analytical and being vigilant is a part of their skill set. To be able to look ahead, predict potential pitfalls in a project or business plan and then weigh up those potential issues against business priorities undoubtedly has its unique stresses. It is of little surprise that risk managers are awakening from dreams of traffic light coded dashboards, implementation checklists and models on account of their business risk. In fact, this concern is forming an increasingly important part of the strategic decision making process, especially as many risk managers report directly to board level. This added pressure will inevitably lead to many more sleepless nights in the future.
The Federation of European Risk Management Associations’ (FERMA) European Risk and Insurance Report 2014 sums up the top issues risk managers have been grappling with and will continue to focus on this year. The top ten key concerns for risk managers may not be all that surprising as they reflect priorities for top level management across the industry, but the fact they are shared, shows board members that their concerns are not unique. The number one spot in the FERMA survey was naturally occupied by 'government intervention and regulatory change'. Interestingly the issue of debt and cash flow is lower down the order than may be expected, reflecting increased confidence amongst the business community on economic stability and growth. The top ten issues listed are:
- Government intervention and regulatory change
- Reputation to brand
- Compliance with regulations
- Economic condition
- Market strategy
- Planning and execution of strategy
- Human resources
- Product liability
- Debt and cash flow
A risky future ahead?
This increased confidence is also reflected in Protiviti's Global survey of board members and C-level executives which showed that 2015 is perceived to be a “little less risky” for organisations than previous years. In line with FERMA’s findings, Protiviti’s survey similarly highlighted 'regulatory change and increased regulatory scrutiny’ as the top overall risk for the third year in a row. This was followed by cyber threats, economic conditions and employee succession challenges (all given equal points in the 'concern rating' scoring system). This reiterates the growing importance of risk management, and the confidence amongst executives, in their ability to manage internal risks, alongside business confidence in the macro-economy.
Resourcing risk teams
The ability to attract and retain top risk management talent is clearly going to be a growing issue this year due to supply outweighing demand for skilled professionals. Many firms are planning to dedicate more resources towards mitigating business risk in 2015, an attitude echoed in the Robert Half Salary Guide, which shows increased upward pressure on salaries across this skill-set. Although there are indications of a slight relaxation in the heightened risk environment compared to recent years, companies will need to act quickly to build out their risk management functions before top talent is hired by the competition.
The changing role of risk
Alongside identifying and managing the risks above, there is an increased focus on delivering the “correct” risk culture within all functions of business. This is changing the role of risk management from that of a “scorer and reporter” to a “business partner”, in a similar fashion to that faced by Finance, HR and IT over the past decade. Lessons can be learnt from how these functions have successfully changed (including the demand for different skill sets and changing career paths in financial services). Risk functions should be seen as contributing to the creation of opportunities, both internally and for competitive business advantage in the wider market. Businesses must start to prepare for this change and integrate risk management into their fundamental ways of working. Meaning less sleep being lost on account of risk concerns.
Struggling to integrate risk management into your business? Contact us to see how we can help you secure the right talent.