(extract from the Guide to effective risk management 3.0, read the full book for free: https://www.risk-academy.ru/en/download/risk-management-book)
A large part of risk management success depends on the support and commitment from executives, Board members and key stakeholders.
It is important, as early as possible, to identify specific people at different levels within the organisation who support the concept of risk-based management and are ready to assist the risk manager:
- At the executive level – risk managers should find what motivates different executives, the CFO, for example, may be interested in implementing and supporting risk management to show the realistic risk-adjusted results and forecast to the banks and insurance companies to save on financing or insurance costs. Or he may be interested in having a methodology to validate investment projects, because he is not happy with how company was investing in very high risk initiatives lately. The COO may be interested to decrease the level of operational risks. The HR Director may be interested in timely identification of the staff turnover risk, etc.
- At the Board level – independent directors or other Board members may be supportive of risk management because it provides greater transparency in decision making and creates an additional information channel for them.
- At the auditor level – risk managers should participate in the audit methodology discussion and try to synchronise risk management methodologies between what is used internally and what external auditors apply.
- At the regulator level – risk managers should discuss regulators’ expectations and methodologies to try to synchronise risk management methodologies between what is used internally and what regulators expect.
Finding the right sponsors is more of an art, than a science. It’s highly unlikely that the risk manager will be able to convince all Board members or all executives. However, this is not really necessary, as long as the risk manager has support from certain individuals at every level mentioned above.
Alex Sidorenko from RISK-ACADEMY talks about finding the right sponsors at the executive level, the Board of directors and the external auditor and regulator level.
Watch more free risk management videos on http://www.risk-academy.ru/en/risk-management-video/ or subscrive to RISK-ACADEMY youtube channel https://www.youtube.com/user/alexausrisk