Building a Robust Operational Risk Appetite Statement

Andrew Smart, CEO and founder of Manigent, a Strategy and Risk Management consultancy, has recently developed a whitepaper on designing an operational risk appetite statement. This paper outlines a seven step process which enables organisations to deliver an operational risk appetite statement which will meets regulatory obligations while adding real business value. This paper was recently featured in new e-magazine, The Risk Universe, which is a new online publication developed by industry professionals, for industry professionals. Focusing on operational risk management, Risk Universe aims to provide all the information Risk Managers need.

Alongside the seven step 'how-to' process/guide, the benefits of a strong appetite statement are explained and real practicalities of managing and accessing risk appetite are demonstrated, including using the appetite alignment matrix. With mounting regulatory demands faced by many financial institutions, and other regulated industries, a robust risk appetite statement assists organisations to execute their strategy execution by clearly defining the boundaries within which they can operate, and improve risk management processes by guiding tolerance setting. By following the seven step procedure, alongside the use of key risk management tools, organisations can expect to improve their strategic execution, whilst reducing risk-related losses and delivering regulatory compliance.  

To download this whitepaper, click here.

Manigent Start 2012 with Two Major Projects Wins

Manigent is pleased to announce a successful start to 2012, with two major project wins. One of the projects will be with an Investment Bank assisting them to meet the regulatory obligations from a number of regulators globally, including the FSA here in the UK. The second project is with a legal services regulator with the intention to build additional risk management at a transitional time for the industry, with the introduction of Outcomes-focused Regulation (OFR) and Alternative Business Structures (ABS). Both of these clients chose Manigent as they recognised the value of the Risk-Based Performance Management approach, Manigent’s integrated approach to Strategy Execution and Risk Management.

Both projects will take place over a 90 day period; Manigent will implement a Risk-Based Performance Management approach within each organisation and already, the clients are recognising early success as a result of the integrated strategy and risk approach.  

Whilst it has been highlighted in the media that businesses face a tough year, many organizations, even with more spending restraints in place, are recognizing the importance and value risk management can add to a business. The Risk-Based Performance Management approach, developed by Manigent, provides framework which integrates strategy execution and risk management.

The Risk-Based Performance Management approach is a proven response to the strategy and risk management challenges faced by regulated firms in the current economic and regulatory climate. By integrating strategy and risk management organisations are able to drive strategy delivery, reduce risk-related losses and improve their deployment of capital while creating the right culture – a ‘strategy-focused, risk-aware culture’. 

Investment Banking Project
During the Investment Banking project, Manigent will be working with key staff in Operations and Risk Management to provide subject-matter expertise on the topic of strategy and risk management, as well as providing the project management ‘know-how’ to ensure the successful deployment of their integrated approach. In such projects, Manigent always seeks to deliver value very quickly and this has been achieved by developing a clear picture of the gap that exists between strategic objectives and operational activities, and in turn, closing that gap through the alignment of processes and projects to strategy. Additional value has been created through Manigent’s discovery workshop process which has been used to rapidly identify our clients ‘key risks’ at a strategy and operational level. Initial feedback internally, and from the regulator, has been positive.

Legal Services Project
With the introduction of Outcomes-Focused Regulation (OFR) and Alternative Business Structures (ABS), the legal profession is undergoing one of the most significant regulatory changes in its history. This will require all the stakeholders in the industry to develop a range of new strategy and risk management capabilities; therefore, Manigent’s integrated approach, Risk-Based Performance Management, is well positioned to provide a structure and roadmap for regulators and firms alike to follow.

During this project Manigent will be working with one of the industry regulators to develop their internal strategy and risk management capabilities to ensure they meet their statutory objectives and provide thought-leadership at a time of change.  

*/**: Manigent works with clients in sensitive areas of their businesses therefore we respect our client’s confidentiality by keeping our clients anonymous as a matter of course.

Happy Hour #1 - A Great Success

It is 8:00pm as the last conversation ends between a Director of Audit and Risk in the Energy sector and an Executive Director in the private equity industry. Although they have only just met, they’ve spent the evening with plenty to talk about, particularly surrounding our first Happy Hour Topic, Strategy and Risk.

At 5:00pm we opened the doors of a quaint London bakery and welcomed professionals from all industries to join us to discuss strategy and risk; three hours on our guests have exchanged ideas, enjoyed plentiful food and wine and are leaving with a selection of fantastic new contacts. 

Throughout the event, intended to include a 20 minute presentation followed by 40 minutes of networking, exchanges and debates were lively, to say the least. Andrew Smart, presenting the Manigent methodology for aligning risk appetite and exposure, took close to an hour to get to the end of his short presentation, having been, happily, interrupted by questions, opinions and debates from the audience. Click here to view Andrew's presentation.

We shared questions, opinions and experiences on combing risk to strategy at further operational levels within organisations, on how to get the board’s attention to risk issues and risk assessment, on which business drivers to use when defining risk appetite and how to use key indicators to get the best management response, to name just a few of the most interesting debates and discussions. 

The evening was a success - friendly, enjoyable and interesting for everyone who attended. This morning, we already have several repeat sign ups for the forthcoming Happy Hour (March 22nd).

Will you join us next time?

To read more about forthcoming, free-to-attend, Happy Hour events and register your interest (places are limited) click here. 

Risk for Non-Risk Professionals: Executive Workshop

Objectives and Audience 

Risk Management and embedded risk culture has never been a more pressing issues for directors, non-executive directors and senior executives. However, this is a topic which is wrapped in technical language and mystery by risk professionals, consultants and regulators alike.

This short executive workshop is designed to provide pragmatic insights into the topic to enable senior executives to understand the key concepts and ask the right questions.

About the Session

Good risk management is simply just good management, it is fundamental to the execution of any business strategy.

The session will start with on overview of the top strategic risks to watch in 2012, continuing with a methodological approach on how to integrate risk into the strategy setting process. We will also discuss the definition of risk appetite and its alignment with business risk exposure.

Finally, we will review the essential issues of risk management, from framework to governance, risk assessment and communication, to create a robust and efficient control environment.  

Table of Content

• Introduction: Risk Environment

-        Top 10 risks in 2012
-        Strategy, risks and losses

• Integrating Strategy and Risk Management

-        Strategy Setting Process
-        Risk Appetite
-        Risk and the Balance Scorecar
-        Aligning risk appetite and exposure

• Managing Risk

-        Framework
-        Risk Governance
-        Culture
-        Communication
-        Risk Assessment
-        Control Self Assessment
-        Benefits

• Conclusion

Fees and details

When: Thursday February 23^rd, from 12.00 am to 3.00 pm
Where: At the Royal Exchange, London EC3V 3LL
Fee: £250 (lunch included)
Registration: Please contact our events department: becky@manigent.com, alternatively click here to register your interest in the event. A representative will then contact you to confirm your place.

Manigent Launches Strategy & Risk Happy Hour!

A free glass of wine, fruitful discussion and networking with likeminded individuals…

If the above sounds interesting, join us in the heart of the City after work for the NEW ‘Strategy and Risk Forum’, introduced by Strategy and Risk Management Consultants Manigent. Every six weeks, we invite you to join us after work for a discussion provoking 20-minute presentation and wine & snack networking opportunity. We welcome all opinions surrounding Strategy and Risk Management and are excited to explore your experiences within the industry.

Why Strategy and Risk?

Recent and ancient history alike are full of failures of companies having disregarded the risks induced by their strategy. No sector is spared and even the most successful executives can trip over. The aggressive strategy by Jon Corzine (former CEO of Goldman Sachs) when turning a US brokerage firm into a “Capital Markets-Focused Investment Bank” and growing proprietary trading to produce 20% of overall revenues of the firms led, less than 9 months later, to the liquidation of MF Global (October 31, 2011) after wrong bets on Eurozone sovereign debt.

Likewise, the enthusiasm and pride from French bank Société Générale whilst they were a market leader in equity derivatives trading between 2006-2007, fostered a generalised lack of risk awareness, allowing a €5bn loss in rogue trading by Jerome Kerviel that almost bankrupted the bank; they have still, some may argue, not fully recovered today.

In the insurance sector, insurers and reinsurers, particularly those that were exposed to the equity markets for the investment of their premiums during the booming late nineties in a relaxed regulatory environment, suffered heavy losses after the burst of the technological stock market bubble in 2000-2002. For instance, Group profit of Munich Re fell from €175bn in 2000 to €250m in 2001. Munich Re also lost 79% of its market value between its peak in November 2000 and its bottom in February 2003 (Data Source: FT.com). Amongst all the risks, insurers and reinsurers pride themselves to bear and measure; the risk policy regarding the reinvestment of premiums is an important part of the firm’s strategy.

Finally, in the technological sector, the legendary firm, 131-year-old Eastman Kodak Co., more frequently referred to as Kodak, struggles to survive after a long slide started with the rise of digital photography that the photo giant did not catch in time, even though they had researched the technology. Kodak is now is attempting to sell some of its patent portfolio, to avoid having to file for Chapter 11 in the coming weeks (WSJ, Jan 5, 2012). Risks arising from competitive technologies and better products are a cornerstone of strategy definition.

“Strategy and Risk Aligned” will be the first topic of our forum, highlighting positive and negative experiences from firms having either overlooked their risks, or, contrarily, properly anticipated and responded to them, using good practices and necessary risk awareness in the Board room.

We welcome you to join us, share your views and experiences or simply enjoy a drink and listen.

To register for this free-to-attend event, and find out more about future Happy Hour evenings, click here.