Risk STILL isn’t optional: nor is the truth!

Where are the “risk leaders”?

Instead of FS compounding the problems we should be utilising our expertise and resources to establish a means of “repaying” society, by promoting, supporting and investing in building community resilience.

EVERY project, process, task, operation being undertaken by an organisation is reliant upon varying degrees of INTER-CONNECTED process that (often unseen) underpins function. Each contains some degree of risk.

The more complex the process or product the greater the exposure. Risk does not ‘run parallel’ to function, it is inherent to it and, as such, RM cannot be viewed as an option or add-on! To me this, scarily common and naive perspective serves to reinforce the need for a paradigm shift in Corporate culture.

I have revisited this old article for a couple of reasons. Firstly, (even though I say so myself) I thought it rather good! Secondly, I am seriously concerned that, where there should be “thought leadership”, there are, instead, clear signs that in some quarters a, subjective, consultancy-led approach is preferred to a rigorous, quantitative, analysis of business exposures!

This despite IRM, in a paper issued last year [Risk Appetite & Tolerance], advocating a more quantitative approach. In their accompanying webinar they offered a timeous reminder of Board level responsibilities:


Read more of this post

Kodak:: NOT too big to fail…and not alone!

In the Digital Age, inter-connected “business systems” have transformed the business environment, at a pace that exposed the fragility of the institutional model: financial; political; religious; media.

A, morally and financially, corrupt “ME culture”, that spread, like a virus, ‘hidden’ in a high growth, high leverage, high DEBT banking model that, by disguising debt as credit, created addicts hooked on the illusion of prosperity whilst feeding the greed of its creators and exponential growth in financial and social inequality.

Self-similar [self-serving] hierarchical structures and unsustainable strategies.

A model, so unused to dealing with negative ‘feedback’, that its most successful exponents became highly skilled in the arts of ambiguity and manipulation. Accompanied by the inability to distinguish good from bad or fact from fiction, they unquestioningly executed strategies born of, obviously, flawed theories and, like joining Cosa Nostra, once you’re in getting out is a little tricky!

Such self-serving enterprises, lacking in meaningful two-way communication and unable, or willing, to discern noise from signals can ‘miss’ vital signs in their environment. The excessive complexity and close-coupled relationships, it has created to strip value from the system, impedes the ability to adapt at the pace of more ‘agile’ competitors.

Fragile in an uncertain economic environment; vulnerable to the impact of “minor” internal or external sudden – unforeseen NOT unforeseeable – changes.

These once mighty institutions are under increasing pressure from, innovative, client-centric “hub & spoke” business models; transparent; structured and aligned to aid the [non-linear] digital information-flow that underpins functionality, effectiveness and innovation.

The view from “Olympus” and “Why did RBS fail?” v “Roads to Ruin”

The long anticipated report…for what it is worth [in terms of the difference it may make!] is out and, whilst I haven’t read it through fully I was struck by the similarities between this passage and the content of the recent “Roads to Ruin” report into dangerous risk management failure/limitations (delete as required):

FSA on RBS Roads to Ruin
It is difficult, from the evidence now available, to be certain how aspects of RBS’s
management, governance and culture affected the quality of its decision-making,
but the Review Team’s analysis prompts the following questions:• Whether the Board’s mode of operation, including challenge to the executive, was as effective as its composition and formal processes would suggest.

• Whether the CEO’s management style discouraged robust and effective challenge.

• Whether RBS was overly focused on revenue, profit and earnings per share rather than on capital, liquidity and asset quality, and whether the Board designed a CEO remuneration package which made it rational to focus on the former.

• Whether RBS’s Board received adequate information to consider the risks associated with strategy proposals, and whether it was sufficiently disciplined in questioning and challenging what was presented to it.

• Whether risk management information enabled the Board adequately to monitor and mitigate the aggregation of risks across the group, and whether it was sufficiently forward-looking to give early warning of emerging risks.

…weaknesses were found to arise from seven key risk areas that are potentially inherent in all organisations and that can pose an existential threat to any firm, however substantial, that fails to recognise and manage them. These risk areas are beyond the scope of insurance and mainly beyond the reach of traditional risk analysis and management techniques as they have evolved so far. In our view, they should be drawn into the risk management process. They are as follows:

A. Board skill and NED control risks – limitations on board competence and the ability of the Non-Executive Directors (NEDs) effectively to monitor and, if necessary, control the executives.

B. Board risk blindness – the failure of boards to engage with important risks, including risks to reputation and ‘licence to operate’, to the same degree that they engage with reward and opportunity.

C. Poor leadership on ethos and culture

D. Defective communication – risks arising from the defective flow of important information within the organisation, including to board-equivalent levels.

E. Risks arising from excessive complexity.

F. Risks arising from inappropriate incentives – whether explicit or implicit.

G. Risk ‘Glass Ceilings’ – arising from the inability of risk management and internal audit teams to report on risks originating from higher levels of their organisation’s hierarchy.

Now, someone please try to persuade me that the root of the problem isn’t fed by the bounteous supply of Corporate Read more of this post

Governance–Risk–Compliance: accept responsibility to reap the rewards!

We know we can’t make reliable predictions about our environment..but it doesn’t stop us from spending enormous amounts of money to do so. Then to pay for the consequences of getting it wrong!

Introspection needs to get serious and, to do so, go beyond, “how can we improve our margins?” Apparently we don’t like to indulge in too much self-analysis, even though identifying and addressing “flaws” at source makes so much more sense. We can influence, manage or control what we do, why and how we do it. There is very little we can influence outwith our immediate environment. BusinessRisks

To put this into a business context and convey the message about how complex any business can become, consider the following table:

If this is insufficient to convince you that there are enough risks associated with behaviour to be getting on with please consider how many of these could be addressed by a robust Operational structure!

If you still have doubts, perhaps this extract, from a very interesting paper, will help. It was the result of a collaboration between US National Academies/National Research Council and the Federal Reserve Bank of New York on an initiative to “stimulate fresh thinking on systemic risk”.

Catastrophic changes in the overall state of a system can ultimately derive from how it is organized — from feedback mechanisms within it, and from linkages that are latent and often unrecognized Read more of this post

RBS Bonuses, Bullying & (more) BS

BBC News – Royal Bank of Scotland announces £3.6bn of losses

In the style of “Points of View”: Why oh why oh why are we subjected to numerous column inches, hours of discussion, Select committee interviews, general politicking and bullsh*t on what are patently SYMPTOMS!?

It is all just further evidence that it is the CULTURE that needs to change before anything else of any real significance or permanence will occur.

Merciless leader Top performer

As far as RBS is concerned, it is pretty common knowledge that their “disgraced”, but unpunished and not impecunious, former leader has a track record akin to  Genghis Khan at the peak of his powers. Ok, so in keeping with modern etiquette his enemies were only put to the literal (financial) sword…whilst he is STILL a Knight of the Realm. Many of them, deemed to be ”traitors” from within his own ranks, suffered…along with their, equally innocent, families…as a direct result of their familiarity with old fashioned values – like Governance, Risk & Compliance

A great quote sprang to mind:


So Stephen Hester tells us that “…… some of our best-performing people have been leaving in their thousands”. As a taxpayer and, therefore, shareholder – for what that is worth – I am delighted to hear these greed merchants and acolytes of a disgraced and discredited regime are taking their “skills” elsewhere. PERHAPS THEN THE EMPHASIS MAY SWITCH TO DELIVERING THE TYPE OF PRODUCTS, SERVICES AND INVESTMENT STRATEGY THAT COMMENCE THE PROCESS OF REBUILDING TRUST.