Why is risk management a must in business sensitive sector

OPINION

Today we see buildings falling, catching fire destroying billions of assets and customer sensitive documents being victims.

Organizations have remained operating without risk departments to provide oversight on risk related activities for business continuity, others are degrading risk mandate to junior officers overlooking attributes of risk, and some have structure with either chief risk officer or head of risk positions remaining vacant with no resolve of filling them in the near future others have gone ahead to even shut down the units of risks calling it  costs deflating the aspect of hidden costs intrinsic without risk culture

To those institutions that deal in public deposits this can be so risky.

This incipient inclination could put the investment of the ordinary shareholders and other stakeholders in an awkward profile.

It would be an error for an entity to become backward-looking after the development of a strategy and a strategic plan. Things change, meaning that what yesterday appeared like the right thing to do, might no lengthier be the right thing to do today or tomorrow.

Strategy Execution should, incorporate Strategic Risk Management to ensure the organization's devotion is not just directed to what has been, but also future. Institutions therefore need to weigh down their decisions on snubbing risk management and its inherent nature in operations.

During strategy execution there are two threats to the objectives that SRM should be fretful about. The first set   is those to the assumptions on which the strategy and strategic plan were built.

If realism turns out to be dissimilar from what was assumed, during strategy design & scheduling where to do business how to do and how to change the organization accordingly, will need to be reassessed.

The second sets of threats are those of plan execution. The more the assumptions on the strategy turn out to be correct, the more vital it becomes to diligently execute the plan.

Any obstacle that can prevent this in the future, it should be dealt with expeditiously, the question is can this be achieved without SRM? Whose role would this be without either chief Risk officer or Head of Risk?

To say the least this is where the operations risk bonds with strategic risk. The operations risk involves people risks such as error, fraud conduct and systems and processes failures

The less superior decisions the top executive may make will affect earnings to the institutions.

it's thus important to balance between the risk you can see and those you cannot, this may need one to have glimpse of the available experts where not sure for effective risk mitigations and sustained business.

 Frauds that may be committed will affect earning tributary, the poor products providing no solutions, Poor customers' service, high turnaround, Malfunctioned ICT system, BCP unpreparedness, poor stress test running, and Staff safety unpreparedness.

These have strategic risk aspect though in classification are operations. For identification, monitoring, assessment, measurement, reporting and treatment needs robust risk department.

To what may be considered the least yet mammoth is the rising unemployment stature in the African continent comes with salient risk of self-interest, against subordination of individual interest to the corporate good thus leading to compromised control environment.

Organisations such as Banks, telecom, insurance and some government parastatals their operations are sensitive, owing may need to take new approach for additional safeguards to protect investors' interests.

Some unconsciously with recourse imagine and by nature tend to recruit related parties this renders the control environment less effective if not ineffective. Obviously internal audit that supports independent oversight is not a saint either.

There should be a new approach all together to ensure sound control environment eg supervised institutions like banks and insurance institutions their heads of control functions such as internal audit, risk and compliance though vetted the central banks and insurance regulatory authorities can amend their mandates to include staff rotational within the same industry say annually this may strengthen supervision that will support strengthened governance.     

The board oversight role in this context exercising the mixture of the skill set, experience and professional touch can be of great value addition to identify and treat these emerging risks, if controls are to remain of affluence to allow effective corporate governance infused for sustainability growth and development of the institutions.

As I conclude I add my concurrence that every organization has its own risk appetite statement but this still needs effective governance environment if the investment of the owners and if fiscal and monetary policy is to remain sound and preserved.

In the past decades  telecom industries were still appreciating the needs for the fully fledged risk function lately there has been a paradigm shift  for most of them if not all have embraced the need for risk function.

My former classmate who works with one of the telecom company attributed it to changes in customers' tastes in mobile money transfers following the government recent introduction of mobile tax.

Their move of embracing risk function is commendable; risk is uncertainty event and can be cryptic.

Important now for all of us to embrace risk management whether in building, construction, agriculture, road constructions, our homestead, oil and gas industries. It's the only safety way of doing business.    

By Gerald Wandera Obbo -BCOM,PGD-M&E,MBA

Former Head of risk Top Finance Bank ltd

Managing consultant in Risk management with polycentric Enterprises Africa ltd.

geraldobbo8@gmail.com/wandenbra@yahoo.com