As we adapt to the era of ‘perma-crisis’, the business rationale for pushing risk management up the strategic hierarchy has never been clearer
The recent relentless series of unprecedented global events has spawned the term ‘perma-crisis’.
From the COVID-19 pandemic and the ongoing war in Ukraine, to the escalating impacts of climate change and growing financial uncertainty, individuals, corporations, and states are facing myriad challenges from this highly charged and expanding risk environment.
Further, the impacts of this event surge are being amplified by risk accelerants such as globalisation, and society’s increasing interconnectedness and mobility; while traditional mechanisms for risk transfer are struggling to keep pace with the rapidly evolving risk landscape, reducing the capacity for organisations to insure against the financial consequences.
Taking a lead position
In such an environment, FERMA believes that the business rationale for elevating the risk management position within an organisation’s strategic hierarchy has never been more evident.
Our theme for 2023 is ‘Be risk leaders’. In many ways a natural progression of our 2022 theme of ‘Transitioning Together’, it is our view that risk management must be seen as a value-adding function which extends beyond the management of operational risks and engages directly with the C-suite to support the broader strategic ambitions of the organisation.
Risk managers can and should play a lead role in facilitating sustainable corporate performance and boosting overall competitiveness.
In the case of COVID-19, for example, reports have shown that those organisations better able to mitigate the impacts of the pandemic and maintain operational effectiveness, emerged in a stronger position to achieve rapid growth and outperform less prepared organisations.
The potential interaction points with the strategic agenda are extensive and growing.
Risk managers, given their unique position within the corporate environment and constant external horizon scanning, are ideally placed to engage in dialogue on a range of business-critical fronts.
From meeting ESG responsibilities and facilitating the transition to a carbon-neutral state, to boosting supply-chain resilience and managing escalating cyber threats, they can contribute significantly to the decision-making process.
If all stakeholders recognise this business imperative, then the focus shifts to how parties can facilitate that improved integration of the risk management function into the strategic framework.
From risk-centric to objective-centric
One area that FERMA considers of particular importance in the evolution of the risk management function is the ability to transition from a risk-centric to an objective-centric risk management approach.
Essentially, this process looks to reposition the key responsibilities for risk assessment and reporting, and place an equal emphasis on strategy and value creation and preservation goals.
Such a shift not only serves to emphasise the value of the risk functions but also integrate risk management more effectively into strategic planning.
It is also important to recognise that the leadership role of the profession should extend beyond the parameters of the individual organisation. We firmly believe that the risk profession must have a seat at the legislative table.
One of FERMA’s primary functions is to represent the interests of European risk managers at EU and international level, not just on developments relevant to the profession itself but to the corporate agenda.
For example, risk leaders are feeding directly into developments on critical developments such as the EU Climate Resilience Dialogue, Corporate Sustainability Due Diligence, the EU Cyber Resilience Act, and the legislative proposal on Open Finance.
As corporations address a shifting risk environment on a growing number of fronts, while simultaneously coming under greater scrutiny from a widening group of stakeholders, there is an onus on both boards and risk practitioners alike to elevate the risk management function to a leadership position.
Dirk Wegener is president of FERMA