The Yin and Yang of Risk Management

a While ago I worked with a client where it soon became apparent that too much attention was given to financial indicators and not enough to intangible measurement. As I explained to the client there is was a need to "balance the yin and the yang" of the risk management approach in the company.

This comment emphasizes both "hard" and "soft" sides of risk management. The hard (yin) includes committees, policies & procedures, quantitative assessments, reporting, limits, audits and systems.

The soft (yang) reflects awareness, people, skills, integrity, incentives, cultures, values, trust and communication. Both sides are essential to a sound program and a sound reputation.

Is your risk management system adequately balanced?

 

Technorati Tags: Risk Management,Reputation,Intangible Measures,A Need for Balance,Yin/Yang

Financial Institutions do not take Risk Management seriously

I just read an interesting article in the Business Report which stated that the global financial crisis is largely the result of financial institutions not taking risk management seriously.

The article contained a number of interesting pointers and is based on a KPMG survey on risk management in banks which was released on Monday.

See http://tinyurl.com/aqqaxg

The article states that risk management was just a support function and an interesting finding was that though risk management programmes exist, there were shortcomings in their approach.

This correlates with my experience in teaching understanding about reputation risk. Worldwide reputation risk is seen as the one risk that is the most difficult to define and manage. Therefore it is often left to chance and dealt with post event.

It just goes to show that if there are problems existing with traditional risk programmes, then reputation risk is even less understood and managed.

In my master class workshops I show the audience three ways to define reputation risk. It is only then that the reality dawns on them, how to mitigate it.

(If you are interested in learning more about Reputation Risk, and whether it is a strategic risk on its own or just a consequence of a risk, register for my next Reputation Risk Management Master Class).