The Institute of Risk Management (IRM) is the world’s leading enterprise-wide risk education Institute. We are independent, well-respected advocates of the risk profession, owned by practising risk professionals. IRM passionately believes in the importance of risk management and that investment in education and continuing professional development leads to more effective risk management.
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Risk managers – know your place!
“If you want a seat at the top table you need to demonstrate that your efforts are not just about protecting your business, but about building your business.”
It’s a refrain often heard in risk management circles, given that those top table seats are proving to be elusive for many. Yet the effective practice of risk management can be critical to building businesses – or at least, it could be.
The famous WEF Global Risks Report has, for years, mapped out how global risks evolve and connect. This year, it counts wealth disparity, anti-establishment populism, societal division, managing technological change, cooperation breakdown and climate change amongst the top challenges facing the world, with business as a key actor.
Systemic risks like these confront those at the top table regularly. Whilst they might seem remote to the concerns of most risk managers, in fact they are central to building business success for two fundamental reasons. First, they threaten the stability of the very contexts and systems needed for achieving business success in short medium, and long terms.
Second, local actors, experiencing hard transitions and volatile tensions that are related to climate, economic, and technological change, often blame “big business” – whether fair or not – for creating such conditions. This endangers the license to operate businesses need to succeed in local contexts.
These challenges (and many others like them) are born from a fracture of trust. Take a look at the latest annual Edelman Trust Barometer. It points to a significant drop in trust in government, business, NGOs and the media by the general population. “Trust is in crisis around the world,” it concludes, resulting in destabilising social, economic and political effects, the full consequences of which are yet to play out.
In such conditions, it’s very timely for the risk management community to be contemplating its future. If risk management practitioners are to help their organisations go beyond protecting their business to help grow it, then two things seem clear: They will need to take a close look at their role in building or rebuilding trust in business; and a new and cooperative approach to defining and addressing risk is needed – one that can help build trust and tackle the kinds of emerging risks we face.
‘Cooperative risk management’ advances risk management practice in two ways: first through a serious orientation to understanding, and anticipating the likely impact of businesses upon local contexts from the ground up before they act (before, for example, hiring practices are found to contribute to the escalation of local tensions, leading to a plant shut-down, as recently experienced by a major multinational); second, through a shift in perspective when it comes to defining risk. As we define it, a cooperative approach to risk is about identifying where shared risk lies, and where goals are held in common as the foundation for better local strategies.
In this sense, cooperative risk thinking represents an imperative for risk management practitioners to adopt practices to listen, learn and engage with stakeholder communities as a pragmatic way of generating a more holistic view on risk. By taking a consultative approach, they can learn about risks to their operations that otherwise may remain invisible until it is too late, since they are only visible from the local point of view. Likewise, learning about needs, preferences, and priorities from different stakeholder positions can help identify important entry points from which genuine collaboration, and opportunities for success, can be built.
Unfortunately, most current risk management practices are not set up to engage this agenda. This is a major issue when communities are making their voices heard in new and impactful ways, as examples like Standing Rock in the U.S., amongst others, have shown.
Making the collaborative shift is less about just talking to local people about how business might be impacting them, and more about designing strategies for action that account for what matters to you AND them, and carrying them out in a way that is good for both. This is not a mere reframing of traditional “opinion former research”. Instead, it creates a new model for meaningful partnerships that recognises the significance of local communities to the way we build our businesses, and by giving local stakeholders a voice in the outcome.
With such a shift in perspective, we can begin understanding, addressing, and harnessing the opportunities they actually present, from the outside in and bottom up.
Following the maxim that knowledge doesn’t apply itself, the critical next step is to use that knowledge gained through cooperative engagement to build or adapt strategy to context. We call this the applied move, and our approach to Evidence-Based Design (EBD) and its techniques mark a step change in the effective application of data in the strategic design process. It helps us table and select among better choices of action, informed by a range of stakeholders who have helped us understand what our actions might cause.
Engaging in such a process can be productive in many ways. For example, it can be used to improve scenario planning, create new models for stakeholder engagement, and build sustained capacity within an organisation to cope with complexity. Most significantly, it can help align future conduct with local and international expectations and ultimately reduce the risk of negative impact on companies and communities alike.
As advocates of cooperative risk management as a better way for companies to achieve positive impact and create new opportunity, the risk management community would surely justify their seat at the top table.
Tim Matthews is Deputy Director of The Policy Lab, a strategic research and design institute. www.thepolicylab.org His views do not represent the position of the IRM.
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