THE POSITIVE SIDE OF RISK

Never before has the work and impact of risk professionals been so relevant and so recognised.

In the wake of 2011, a year that saw unprecedented natural disasters, economic volatility and what seemed to be an increased surge of cyber predators, risk practitioners’ jobs have grown tremendously challenging. Yet, as evidenced by results from the ‘2012 Excellence in Risk Management’ survey – released by RIMS and Marsh in April 2012 – a gap remains at many organisations between risk practitioners and senior leaders on whether risk management’s role should be primarily defensive or if it should take on more of a value creation position within the company. Bridging that gap is essential for gaining the full value from strategic risk management practices.

According to the survey of more than 1300 risk practitioners and senior level executives, 87 percent of companies with annual revenues above $1bn say expectations of the risk management department have increased. Seventy-one percent of the executive level respondents agree that the contribution of risk practitioners has already increased.

So if the two groups – risk professionals and executives – are in agreement about the significance of risk management, what is the disconnect?

One factor is a failure to recognise and exploit the positive side of risk. Risk can be characterised as uncertain future outcomes that can either improve or worsen one’s position. Consider the ‘improve’ as the positive side and the ‘worsen’ as the negative side. If you think of hurricanes as a hazard risk that creates losses, consider the same risk from a building contractor’s perspective. Your negative view (threat of losses) is his or her positive view (opportunity for gain) of the same risk.

Jan-Mar 2013 Issue

RIMS