What is a risk? It’s not what you think it is

If there is one thing I learned as a CRO, it is crucial to understand the nature of each and every risk we have to work with. I will no doubt write a separate article about the mistake of aggregating various risks into a risk register or attempting to use the same methodology to quantify… Continue reading What is a risk? It’s not what you think it is

Why Board Audit Committee is the worst place for risk management and having a separate Board Risk Committee is even worse

Over the last 10 years it became almost dogmatic that risk management effectiveness has to be disclosed at the Board level. It seems to be equally accepted that full Board is responsible for risk management oversight, who, however can and often do, delegate this oversight responsibility to the Audit Committee. This is in fact so… Continue reading Why Board Audit Committee is the worst place for risk management and having a separate Board Risk Committee is even worse

Compliance Risk Management – Risk mitigation and reporting

Risk mitigation and trade-off The treatment of compliance risks refers to the corresponding strategies implemented by an organization to deal with its risks. A risk treatment plan should consider a range of treatment options, which may include legal remedies as well as financial, operational and reputational remedies for each prioritized risk. The following factors should… Continue reading Compliance Risk Management – Risk mitigation and reporting

Compliance Risk Management – Risk analysis (part 5)

Step 5. Measure the effect of risks on decisions In order to account for the uncertainty both in the consequences of each scenario and its weight, consequence distributions are multiplied by weight distributions using the Monte-Carlo simulation method. Normally 10000 simulation runs should be sufficient for most compliance risks, however more simulation runs may be… Continue reading Compliance Risk Management – Risk analysis (part 5)

Compliance Risk Management – Risk analysis (part 4)

Step 4. Allocate weights to each scenario In order to determine the weight allocated to each consequence scenario of events triggered by compliance risk, historical data, modelling, as well as expert opinions, can all be used, individually or in combination. Weight of each scenario can involve the following factors: the range of laws, along with… Continue reading Compliance Risk Management – Risk analysis (part 4)

Compliance Risk Management – Risk analysis (part 2)

Step 2. Identify causes and consequence scenarios Causes and consequences for the bow-tie diagram are normally derived from the regulations as well as through consultation with risk owners and subject matter experts. Common consequence scenarios for compliance risks (just a quick example, there is more) include: Risk area Examples of consequence scenarios Licensed activities and… Continue reading Compliance Risk Management – Risk analysis (part 2)

Compliance Risk Management – Risk analysis (part 1)

Wherever possible companies should apply quantitative risk analysis to measure and prioritize compliance risks. Wait what? We can do better than a compliance heatmap? Apparently :)) The following information should be collected and recorded for each identified risk: Possible consequence scenarios as described in the legislation or other regulatory requirements (usually includes fines, 3rd party… Continue reading Compliance Risk Management – Risk analysis (part 1)

Compliance Risk Management – Risk identification

Every organisation is required to comply with laws within the countries it operates in, the legal and regulatory requirements vary between different regions adding to the need to have understanding and confidence in the risk management processes in place. Organisations face considerable uncertainty when making decisions and taking actions that may have significant compliance consequences.… Continue reading Compliance Risk Management – Risk identification

The story behind RISK AWARENESS WEEK

The Challenge Alex Sidorenko has been working in risk management, a relatively small field in quantitative decision making, for 15 years. His speciality lies in the statistics, math and decision-making disciplines. Travelling to speak at summits was a major part of his role as Head of Risk at large corporations. Besides presenting his risk management… Continue reading The story behind RISK AWARENESS WEEK

Twenty insights that will transform the way you think about risk management (part 1)

At Risk Awareness Week 2020, Julian Talbot, risk author and consultant, shared his top insights from over twenty years in risk management. It’s never what you think Key example: “One example, is the world of high reliability organisations which is a well-studied area looking at things like nuclear aircraft carriers, power plants, and air traffic… Continue reading Twenty insights that will transform the way you think about risk management (part 1)