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New Generation Risks |
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In these unchartered territories, most of the risks would be ‘principle based’ as there were no internal precedence to rely upon. Also, a select few of them could well be ‘Black swan’ risks that could completely derail the new initiatives.
Haselfrë constantly reiterates that the focus of management should not be purely on either performance or conformance. There needs to be a balance. With this in mind, risk-adjusted performance measurement decisions are crucial to an organization’s ability to create sustainable value.
Black Swan Risks are of increasing relevance in these turbulent times. By identifying those risks that though highly unlikely (outlier), but when occurred could have catastrophic impact, Haselfrë reiterates the need to inculcate such ‘out-of-the-box’ thinking in the organizations it works with.
Haselfrë can help in ensuring the following to take care of the new generation risks:
- Risk appetite is explicitly set and
communicated
- New Generation risks are
systematically identified and
managed on a consistent basis by
accountable executives
- Risks are explicitly considered
when evaluating new projects /
investments both on a standalone
and portfolio basis
- Business unit performance is measured on a risk-adjusted basis in order to obtain a clear understanding of where and how much value is created destroyed across the enterprise There is a no-blame culture because employees are empowered to make the decisions required by their role in the context of risk appetite – doing the right thing even when it leads to suboptimal outcome is not punished Strategic planning integrates risk management to ensure proper compensation of the assumed risks and optimization of resources.
- The board and senior managers confidently make informed decisions regarding risk/reward tradeoffs related to existing portfolio of business and new opportunities; and Key risk indicators impacting business performance targets are properly controlled.
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