Tag Archives : enterprise risk Management

Expert View: A Report on Risk Management Issues from South-Eastern Europe

Zhetcho Kalitchin and Ivo Miltchanski from FERMA’s most recent member, the Bulgarian risk management association BRiMA, describe how risk management is developing in South-Eastern Europe.

In Bulgaria and most Balkan countries, the economic environment is varied and competitive. Costs for risk management are generally considered too high, and therefore possible economic losses and scenarios are not examined by a professional risk manager. Enterprises rarely rely on risk management when it comes to getting a competitive advantage or ensuring the company’s goals, business continuity and development. A risk manager is only employed in rare situations, at very large industrial enterprises and not within small and medium size enterprises.

Usually companies feel reluctant to use risk management as a tool in the process of implementing innovation in their production/service schemes or range of products. Most often, boards and other decision makers are not convinced that implementation of risk management methodologies and strategies will increase the productivity and security of the enterprise.

Currently, the widely adopted understanding of risk management is narrow mindedly connected only with financial risk analysis and not physical exposures and emerging risks. In many cases, the possible causes of disruptions for a given company are commonly neglected or not even identified. For example, supply chain analysis is widely considered solely an obligation of the marketing department and not a risk management matter.

Bearing in mind the necessity for regulatory changes coming to the European Union in the near future, there is a need to update strategies on a government level in the region as well. To cope with emerging risks and mitigate large scale economic disasters, these updates will need the states’ attention, and we are in discussion with risk managers and members of the academic community in order to prepare a functional framework for analysis, risk identification, implementation of risk mitigation measures and constant updating according to the changing environment.

BRIMA is only the second risk management association in the Balkans. Our main goal is to gather a critical mass of forward-thinking professionals in the field of risk management and combine their efforts in our mission to develop the profession in the Balkans.

Considering the current demand for risk management and the challenges which stand before us, BRiMA fully supports the need to implement FERMA’s slogan – ‘Education, Communication, Leadership’, and we will work towards the creation of a rimap® education center in the Balkan region.

Zhetcho Kalitchin is the President of BRiMA and Ivo Miltchanski is a member of the board of BRiMA.

FERMA calls on Commission to include enterprise risk management in Non-Financial Reporting Guidelines

The Federation of European Risk Management Associations (FERMA) has told the European Commission that enterprise risk management (ERM) is the best method for companies to approach the new EU requirements for large companies to report on their non-financial or corporate social responsibility risks.

Capture cover consultation

Click above to read the response

This comment is at the heart of FERMA’s response to the Commission consultation on Non-Financial Reporting Guidelines, following article 2 of Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups. A large proportion of the 4700 European risk and insurance managers represented by FERMA work for companies that are within the scope of the Directive. As skilled specialists, they are responsible for managing the enterprise risk management process.

Under the Directive, which goes into effect in 2017, large public-interest entities, such as listed companies, should disclose in their management report relevant and useful information on their policies, main risks and outcomes relating at least to: environmental matters, social and employee aspects, human rights, anticorruption and bribery issues, and diversity in their board of directors.

FERMA President Jo Willaert said: “It is difficult for specialists in each department to connect different aspects of risk across functions, leaving grey areas where reporting may be incomplete. We, therefore, urge the Commission to recognise in the guidelines the fundamental role of risk managers and the value of ERM methodology in the reporting of non-financial or corporate social responsibility elements, which require a deep understanding of the business model of the organisation.

He added: “Risk reporting is a key element of the risk manager’s role. Because of the cross-functional nature of the risk manager’s mission, he or she is the best placed person in the organisation to provide assurance that the various types of risks, including those related to corporate social responsibility, have been identified and managed.

ERM is defined as a process “designed to identify potential events that may affect the entity, manage risk to be within its risk appetite and provide reasonable assurance regarding the achievement of entity objectives.” It is internationally set out in frameworks, such as the US COSO, and recognised in international standards.

FERMA has also told the Commission that the value of reporting the risks connected with non-financial elements of business conduct goes far beyond concern for reputation management. “Being in control of these risks opens the way for productivity and efficiency gains over the long term. The creation of a complete, company-wide risk management policy, including non-financial aspects, that leads to thorough risk knowledge should be seen as a global decision-making tool for the board,” stated FERMA in its submission.

Ms Typhaine Beaupérin, FERMA CEO: typhaine.beauperin@ferma.eu, tel: +32 (2) 761 94 31
Lee Coppack, press contact: lee@coppack.co.uk, tel: +44 208 318 0330/ +44 7843 089904
All FERMA press releases can be found here.

It’s not just about insurance: an actuary’s view on risk

We’ve all heard the jokes about actuaries. My personal favourite is this: “How can you tell an extraverted actuary? – he’s the one that looks at your shoes when he’s speaking to you!”, and we all know that the “average” actuary works in an insurance company. However, these stereotypes are fast becoming a thing of the past. The modern actuary is increasingly looking “outside of the box,” and it is becoming common that they are embedded in wider risk management in corporate businesses.

Actuaries love nothing better than to turn a complex problem into a model using their mathematical skills. A risk model is a mathematical representation of a system or process, based on probability distributions of the underlying risk drivers. For example, this may be a model of an uncertain supply chain, operational cash-flow, or any business process. Historical data, as well as the views of risk experts are used to parameterise the model and the risk distributions. Continue reading

Risk Management and Sustainability have much to gain from coordination

Sustainability and risk management in an organization have much to gain from coordination. A better integration between these processes increases their legitimacy and the administrative costs are reduced. Also by linking these processes to operational and business benefits a natural catalyst is created. Continue reading

Building risk culture and the effect of quantitative risk assessment and monetary incentives

A common challenge for risk managers is to motivate business managers to continuously identify and mitigate risks. This is particularly demanding in organizations were risk awareness and risk culture is immature. Continue reading

How to Build Risk into your Business Model

Smart companies design their innovations around managing risk. by Karan Girotra and Serguei Netessine Continue reading