Why You Need Risk Management

By Author: Ambit Collective
Total Articles: 1
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Risk management is not the responsibility of a single department. It is the responsibility of everyone, from the chief executive down. Past corporate failings have been attributed to lack of accountability, strategy and transparency.

Tougher regulations and increasing stakeholder awareness now mean that corporates should demonstrate better discipline, control and responsibility. Failure to keep on top of and comply with existing and emerging regulation could jeopardize reputations and livelihoods.

As businesses evolve, and technology takes center-stage and becomes the backbone of any organization, associated risks have also evolved. This calls for a robust governance, risk and compliance program coupled with practitioners who are well versed and aware of the changes and the underlying change to the risks that matter.

With all these changes, risk management in many companies has been outsourced to external consultants who are adept at fortifying businesses by providing the experience to help companies stay on track and deal with risks that could unhinge their business survival.

Many organizations ...
... believe outsourcing the risk function has several advantages, some of which are listed below:

1. It is not always possible for organizations to challenge the norm while themselves being part of it. External experts come with no past baggage and can look at things dispassionately and question the business as usual.

2. They can challenge the efficacy of the organization’s internal controls in addressing the business risks, something which is not easily possible for an insider.

3. An organization is a complex animal, and no one set of competencies can do justice to the performance assessment of all business operations. External consultants are specialists and have the necessary bandwidth to bring all the required skills to the table. An organization would have to hire multiple people with specialized skills who may not get optimally utilized.

4. An external risk consultant brings experience of assisting multiple diverse organizations, and therefore, can assess and compare practices across industry. An insider would not always carry that perspective given the limited exposure to only his own organization or those where he was employed earlier.

5. Risk Consulting organizations, being service organizations, invest in upskilling their resources on the latest developments in governance, risk and compliance. In-house teams, being cost centers, have limited budgets available at their disposal.