Ken Hackshaw, Enterprise Risk Management lecturer would like to proffer a prediction of sorts:
Given the Covid-19 outbreak and its impact on the global stock market, the global supply chain, health industry, airline industry etc. The role and value of Enterprise Risk Management will see a significant increase in use and applicability. Regulators therefore, will also increase its oversight, relevance and dependence on ERM. Additionally, international credit rating agencies, as part of its international rating criteria/methodology will put greater emphasis on the effectiveness of ERM at private and government agencies.
This prediction is predicated on the following:
- post the financial crisis of 2008/2009, we saw a ramping up of the use and importance of risk management disciplines across the financial services industry.
- The value of risk culture building and disaster preparedness after the Deepwater Horizon oil spills and other major disasters.
- The role of Business Continuity planning after the Fukushima volcano and subsequent tsunami
That being said, we at the Trinidad and Tobago Risk Management Institute (TTRMI) have been preaching from the mountain tops about being proactive and anticipatory: about future proofing your business: about doing Horizon scanning to identify emerging risk and about improving the risk culture of your organization and yes about Business Continuity planning.
One may argue that Covid-19 outbreak is like a black swan, no one anticipated this risk event, and that maybe true but we would have said many times: Risk management is a force multiplier and can be viewed as being similar to the the airbag in your vehicle, it will not prevent the accident from occurring but it will reduce the impact WHEN, not if, accidents occur. I therefore agree that this risk of Covid-19 could not be planned for but I submit that institutions that had/have a robust and integrated ERM program will fear better than those who had nothing.
Currently many organizations in Trinidad and Tobago and elsewhere, are scrambling to put “things in place” as a result of the covid-19 outbreak, when they should have been “implementing contingency plans.” This would have been accomplished as part of the business impact analysis they would have conducted many moons ago, and as part of the risk assessments they would recently conducted or updated.
While strong risk management practises can’t stop the spread of Covid-19 or prevent other pandemic risk events, enterprise risk management processes can help organizations anticipate the impact of these kinds of unforeseen, extraordinary events.
Note the following:
While ERM is not a new concept, its increasing influence on ratings and regulations cannot be ignored. As the methodologies employed by rating agencies and the reporting requirements set by regulators become more prospective in nature, ERM analysis as a leading indicator of a firm’s ability to operate within a controlled risk/reward framework becomes that much more influential on how a company is rated or regulated.
We are living in a new VUCA world, of which Volatility and Uncertainty (V&U) will bring the most risks.
For more information on Enterprise Risk Management, Contact Umesh Sookoo at 299-0218 ext. 367 or email: u.sookoo@lokjackgsb.edu.tt
