TaxPersonal TaxThe importance of taking risks.

The importance of taking risks.

One thing to come out of the fuel crisis is the highlighted need for risk management. But for it to be a success it needs support at the very top.

Mention the word ‘risk’ to most people and they immediately think of danger and the potential losses that will be incurred.

It’s a very human reaction linked to self-preservation of course, but there is an alternative view. There is the obvious downside to risk but equally there is a risk upside. Risk can also produce beneficial change and opportunity – if it is managed properly.

In my view risk management is everyone’s problem and of course everyone’s opportunity. No-one can claim total ownership or mastery of risk because it affects every aspect of business life. Because of the diverse and widespread nature of risk, the role of risk management has imprecise boundaries.

Although at its core as a function, there are basic disciplines such as risk identification, risk assessment, risk control and risk strategy, a risk manager can often find the management of a specific risk project will require knowledge and expertise from other business functions.

To manage risk well, I believe risk managers (and their organisations) need to liaise and consult with fellow professionals within their company on a regular, almost constant basis.

Corporate functions that may be disparate or insular need to rid themselves of the silo mindset of ‘doing their own thing’. Organisations need to break down barriers to co-ordination and harness the full range of skills, knowledge and resources available in order to manage a risk concern well.

I see the management of risk as a virtuous circle – ‘a beneficial recurring cycle of cause and effect’, as The Oxford English Dictionary defines it.

This concept relates to the process and culture of risk management.

The virtuous circle concept breaks down barriers by creating a partnership approach among professional disciplines that can result in a risk management strategy that is greater than the sum of the parts.

Co-operation, co-ordination and communication should become the watchwords of professional disciplines involved in risk – whether it is accountancy, risk management, health & safety, quality control or internal audit, or any others. And I see the risk manager acting as driver of the concept, acting as facilitator and as a reporting focus. Some organisations actively support this sharing of risk knowledge and awareness by establishing a Risk Committee or Risk Council, drawn from representatives of relevant management functions.

Either way, the concept needs support from the highest level of management to succeed; from directors who see and appreciate the strategic value of integrated risk management; from people who don’t view risk with fear but treat it with respect, understanding and an upbeat view.

Alex Fleming is chairman of the Association of Insurance and Risk

Related Articles

Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

Personal Tax Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

2w Alia Shoaib, Reporter
Rent-a-room relief – the survey says…

Personal Tax Rent-a-room relief – the survey says…

2m Helen Thornley, ATT Technical Officer
What should the OTS prioritise in its review of inheritance tax?

Personal Tax What should the OTS prioritise in its review of inheritance tax?

4m Alia Shoaib, Reporter
LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

5m Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

6m Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

7m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

7m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

9m Alia Shoaib, Reporter