Managing risk is riskier than ever

Navigating risk management has never been more challenging in today’s complex landscape. These days it’s common for local businesses to find themselves caught in a whirlwind of wider reputational, environmental, regulatory, and societal pressures.

The Jersey Financial Services Commission (JFSC) notes how Moneyval has led to the equivalent of a decade of regulatory and legislative change in the last two years. This means that, unfortunately, merely increasing the scale of your risk operation is no longer viable.

To navigate this, it's crucial for the C-suite to not just manage risk but embrace it as a catalyst for value creation. This calls for a radical transformation in approach and strategy.

Both internal and external factors are combining make risk management more complex and challenging.

Geopolitical tensions are sending shockwaves through every sector – impacting supply chains, financial systems, access to capital, prices of goods and commodities, and ultimately, economic stability. While the combination of technological advances, massive new regulatory burdens, and the threat of climate change have created a delicate reputational risk environment.

Forces from the inside are equally disruptive for local businesses. The pressure from stakeholders to reduce risk-associated costs is getting ever tighter.

Staffing pressures in recent years have led to a prioritisation of business as usual over efficiency gains through the adoption of new technologies and processes, further impacting costs in the longer term.

Risk functions are increasingly expected to grapple with all this, whilst still being more productive and effective by reducing their overall costs and footprint. Such a huge challenge will require a dramatic shift to how an organisation manages its risk.

Key decisions by the risk function should answer the question – how will this next step add value to the business? Such an approach can help transform risk from the “department of no” to a service that collaborates effectively with the C-Suite to help garner support for risk transformation.

This two-way street can involve:

• Developing a value-based risk framework to enable C-suite executives to model their strategic and operational decisions around risk, and the expected value gained from a better understanding of it. This way, the risk function becomes part of the value-creation process – enhancing its standing across the organisation and demonstrating a measurable cost / benefit outcome for the business.
• Defining data requirements and reporting, leading to increased awareness and understanding of potential risks and their impact.
• Using risk insights to educate staff to enable the business to fully experience the positive impact of embracing risk.

As technological advances accelerate, so too do they enable risk professionals to manage change better by streamlining workflows and reducing cost. However, they also bring in fresh risks.

Quality, reliable data is key. Organisations should avoid making important decisions based on false conclusions, while preventing data misuse that breaches privacy regulations.

To achieve this, risk professionals should bring technologies together in an integrated framework on a singular platform. One that uses common data and offers fast, easy-to-understand advice to users across the business.

This will help:

• Embed data-analytics and thereby transform increasing amounts of raw data into actionable insights. This will be crucial in identifying emerging risks early so that the organisation can mitigate them and make better business decisions.
• Improve data quality – a common data architecture and data governance can enable all staff to feed in internal and external data, model risks, and gain a more accurate and up-to-date view of risks impacting their part of the business.

It’s clear that organisations require increasingly robust risk management frameworks to navigate the intricate landscape of risk and compliance. Our KPMG risk professionals draw upon extensive experience and technical capabilities to help you overcome multifaceted challenges.

Whether grappling with regulatory complexities or evolving technology threats, KPMG firms offer a suite of services to fortify risk management practices and cultivate trust. Email mashburn@kpmg.com to find out more.