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    Guide to effective risk management 3.0
    Guide to effective risk management 3.0
    Guide to effective risk management 3.0
    Ebook141 pages1 hour

    Guide to effective risk management 3.0

    By Alex Sidorenko

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    About this ebook

    Risk management is ultimately about creating a culture that would facilitate risk discussion when performing business activities or making any strategic, investment or project decision. Below are some practical steps to integrate risk management into strategic planning, decision making and performance management.

    In this free book, Alex Sidorenko and Elena Demidenko talk about practical steps risk managers can take to integrate risk management into decision making and core business processes. Based on our research and the interviews, we have summarised fifteen practical ideas on how to improve the integration of risk management into the daily life of the organisation. These were grouped into three high level objectives: drive risk culture, help integrate risk management into business and become a trusted advisor. This document is designed to be a practical implementation guide. Each section is accompanied by checklists, video references, useful links and templates.

    This guide isn't about "classical" risk management with its useless risk maps, risk registers, risk owners or risk mitigation plans. This guide is about implementing the most current neuroeconomic and risk analysis research into the business processes, decision making and the overall culture of the organization.

    LanguageEnglish
    PublisherAlex Sidorenko
    Release dateJan 21, 2017
    ISBN9781370363445
    Guide to effective risk management 3.0
    Author

    Alex Sidorenko

    ALEXEI SIDORENKO is a uniquely qualified expert with over 11 years of strategic, innovation, risk and performance management experience across Australia, Russia, Poland and Kazakhstan. In 2014 Alex was named the Risk Manager of the Year by the Russian Risk Management Association. Currently working at RUSNANO, Alex leads the risk management team at the largest private equity fund in Russia, specializing in hi-tech and nanotechnology investments. Alex is responsible for ERM at the fund level and across its 97 portfolio companies. Alex's work at RUSNANO was awarded first prize in the category Best ERM Implementation by RUSRISK in 2014. In 2012 Alex created RISK-ACADEMY, company specializing in risk education. RISK-ACADEMY was awarded Best risk management education program by RUSRISK twice in 2013 and 2014. Prior to that at Skolkovo Foundation, Alex lead the risk management function at the largest innovation center across CEE and was responsible for risk management as well as providing risk consulting to more than 830 innovation companies. Alex recently published a book on Amazon called "Secret recipe for risk managers" and regularly presents at risk management conferences. In 2012 Alex created a 12-series TV program dedicated to risk management. Alex currently lectures at various MBA and Executive MBA programs at the MIRBIS, MFUA, OpUS, SKOLKOVO and USIB. Previously at PwC Moscow, Alex was responsible for delivering risk consulting services within Russia, Poland and Kazakhstan. Alex was involved in the complete rewrite of the PwC global risk management methodology. He also created and hosted quarterly PwC risk management breakfasts for Russian CROs. Prior to that at Deloitte, Alex was responsible for leading the risk consulting services across NSW, Australia. During that time, Alex conducted various strategic risk reviews, developed numerous risk frameworks, delivered risk management training programs and participated in various risk assurance activities.

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      Book preview

      Guide to effective risk management 3.0 - Alex Sidorenko

      OBJECTIVE 1:

      DRIVE RISK CULTURE

      A. EVALUATE TO WHAT EXTENT THE COMPANY'S STRATEGY@RISK

      Kevin W Knight, during his first visit to Russia a few years ago, said ‘risk management is a journey… not a destination’*. Risk practitioners are free to start their journey at any point in this guide however the authors think that evaluating strategic objectives@risk can be considered a good starting point. The reason why we believe this is a good starting point is because it is relatively simple to implement, yet has an immediate and a significant impact on senior management decision making.

      Before reading however, risk managers should start by having a frank discussion with their key stakeholders to try to understand what their expectations from risk management are. It is important to understand what their real appetite for change is.

      Risk management is ultimately about creating a culture that would facilitate risk discussion when performing business activities or making any strategic, investment or project decision. Below are some practical steps to integrate risk management into strategic planning, decision making and performance management.

      * https://www.scribd.com/document/283750131/A-Journey-Not-a-Destination-pdf

      A1. Start by selecting the overall framework and documenting legal requirements

      As far as international risk management standards go, the best choice for any non-financial organisation is by far the ISO 31000:2009. At the time of writing the standard had been officially translated and adopted in 44 out of 50 largest countries by GDP, making it truly global. ISO 31000:2009 is an international standard that provides principles and guidelines for effective risk management. It is not specific to any industry or sector and is intended to be tailored to meet the needs of the organisation. The standard is currently being reviewed by more than 200 risk professionals from 20+ countries from around the world. It is expected that the updated version, due to be published mid to late 2017, will provide greater emphasis on the need to integrate risk management into business activities and decision making and focus on the human and cultural aspects role in risk management.

      Some industries have additional risk management related standards or guidelines. These are usually published by the industry associations, such as the Risk Management Guidelines developed by the European Private Equity & Venture Capital Association. And some countries, Germany for example, have specific laws and regulations related to risk management. All this additional guidance should be taken into account when implementing risk management in any given company.

      The complexity and the risk management framework selected should be proportional to the size and risk profile of your business as well as the overall risk management maturity.

      USE THE CHECKLIST PROVIDED BELOW TO TURN THIS SECTION INTO ACTIONS

      Check for country specific laws and regulations related to risk management

      Check for industry specific risk management guidelines or standards

      Familiarise yourself with the ISO31000:2009

      Get stakeholder buy-in on the selected risk management framework/standard

      USEFUL VIDEOS

      A short video providing some suggestions on how to encourage senior management to implement risk-based thinking in the organisation.

      https://www.youtube.com/watch?v=3MbJLkSlbU4

      In this video Alex Sidorenko talks about what the future of risk management holds for risk practitioners.

      https://www.youtube.com/watch?v=yAiRWwYItdc

      Alex Sidorenko from RISK-ACADEMY discusses whether risk management is a profession or just a management tool.

      https://www.youtube.com/watch?v=u9q6N8hr0qc

      USEFUL LINKS AND TEMPLATES

      Roadmap for Risk Management Implementation - http://www.risk-academy.ru/en/download/roadmap-for-risk-managementimplementation/

      A2. Assess the effect of uncertainty on strategic objectives

      Once the overall framework/standard is agreed upon and signed off by the key stakeholders, it is time to assess the effect of uncertainty on strategic objectives. Skip this section if the objectives have not been defined or documented in your company or if the objectives are not measurable.

      STEP 1 - STRATEGIC OBJECTIVES DECOMPOSITION

      Any kind of risk analysis should start by taking a high-level objective and breaking it down into more tactical, operational key performance indicators (KPIs) and targets. When breaking down any objectives it is important to follow the McKinsey MECE principle (ME - Mutually Exclusive, CE - Collectively Exhaustive) to avoid unnecessary duplication and overlapping. Most of the time strategic objectives are already broken down into more tactical KPIs and targets by the strategy department or HR, so this saves the risk manager a lot of time.

      This is a critical step to make sure risk managers understand the business logic behind each objective and helps make risk analysis more focused.

      CONSIDER THE FOLLOWING EXAMPLE OF RISK MANAGEMENT IMPLIMENTATION

      VMZ †– is an airline engine manufacturing business in Russia. Their product line consists of relatively old engines, DV30, which are used for the medium-haul airplanes Airliner 100. The production facility is in Samara, Russia. In 2012 a controlling stake (75%) was bought by an investment company AVIARUS.

      During the last strategic Board meeting AVIARUS decided to maintain the production of the somewhat outdated DV30, although at a reduced volume due to plummeting sales and, more importantly, to launch a new engine, DV40, for its promising medium-haul aircraft Superliner 300.

      The Board signed off on a strategic objective to reach an EBT (earnings before tax) of 3000 mln. rub. by the year 2018‡.

      STEP 2 - IDENTIFYING FACTORS, ASSOCIATED WITH UNCERTAINTY

      Once the strategic objectives have been broken down into more tactical, manageable pieces, risk managers need to use the strategy document, financial model, business plan or the budgeting model to determine key assumptions made by the management.

      Most assumptions are associated with some form of uncertainty and hence require risk analysis. Risk

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