No ‘quick fix’ available for effective risk management in organisations, says ACCA
Date
14 May 2019
Sections
InfoSociety
A new report from ACCA (the Association of Chartered Certified Accountants) uncovers how board-level risk management activities vary in organisations as a result of internal and external factors. The report, Risk and performance: Embedding risk management, highlights common challenges and good practices to overcome risk management difficulties.
The study combines findings from four in-depth case studies including interviews as well as a review of current academic literature.
The insights were consolidated to create the ‘risk gearbox’, a conceptual model for embedding risk management in organisations. It shows how formal and informal risk management mechanisms combine to create ‘strategic thrust’ to support the board decisions on strategic risk taking and control. There are also a number of recommendations for organisations looking to improve the effectiveness of their risk management arrangements.
Some key recommendations from the report include:
- Effective risk management requires the use of complementary formal and informal mechanisms to achieve strategic objectives.
- Communication is vital between business units and functions, as well as communication to/from the risk management function and internal audit function
- The risk management function has a pivotal role in communication and building risk management relationships.
Jamie Lyon, ACCA’s interim director Professional Insights, says:
“Organisations in every sector, whether large or small, simple or complex, invest time and resources in managing risk. This new report finds effective risk management is an essential element in the success or failure of these organisations but it cannot be effective if it is not embedded. There are no easy answers or quick fixes when embedding risk management. Given the variety of means available, organisations must allow risk management practices to evolve to their needs.”
Lead researcher of the report, Dr Simon Ashby from Vlerick Business School says: “Our report shows that embedding risk management is about more than monitoring risk metrics, risk and control assessment or independent oversight from the risk function. Staff within organisations need to believe that the tools of risk management and the work of the risk function add value. To achieve this, risk managers must be experts in social networking and relationship building. It is hard to achieve technical expertise in the formal tools of risk management and in the informal aspects of human relations, but we observed four risk functions that were successful in doing both.”
Dr Cormac Bryce from Cass Business School says: “All too often the risk management function of organisations has been seen to concentrate on threat reduction. This current report highlights the important value-added that risk management can provide as organisations attempt to seize opportunities and maximise their success.”
Dr Patrick Ring from Glasgow Caledonian University says: “Effective communication is key to successful risk management in any organisation. Importantly, we found that informal modes of communication are integral in underpinning the more formal organisational structures that support risk management. As a result, the successful risk managers we met were able to build productive relationships across all areas of their organisations, increasing the profile and effectiveness of risk management in their businesses.”
Read the report: Risk and performance: Embedding risk management here.
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About ACCA
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
ACCA supports its 208,000 members and 503,000 students in 179 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 104 offices and centres and more than 7,300 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.
ACCA has introduced major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally.
Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here: www.accaglobal.com