A global industrial manufacturerIncreasing the benefits of risk management

Challenge: Unproductive reporting

A global industrial manufacturer had operated on a traditional risk management setup for several years but was struggling with inefficient reporting. Each quarter, over 100 risks were reported from each department to the Group Risk Office. This office would then spend one week quality controlling and consolidating all of the reports to subsequently deliver one report to the Group Risk Committee.

The process had several shortcomings:

• Many people spent a lot of time on reporting
• Decision-makers spent little time on reading and discussing the reports
• The information in the risk reports was primarily a repetition of knowledge that was already available to decision-makers in the relevant business processes
• No major decisions or changes were driven by the reports

As a result, the reporting units became unmotivated and disengaged in the process, as they felt that the time spent on reporting was meaningless.

Approach: Defining the pillars of risk management

Together with the client, we defined three new pillars of risk management.

“The Persistent Risk Pillar”: The 25 persistent risks that should still be reported on by appointed Risk Owners were identified. Each Risk Owner was empowered and made responsible for coordinating all risk knowledge across the organisation and for maturing the mitigation over time.

“The Tactical Risk Pillar”: Initiatives were launched to mature the organisational ability to understand and manage risks in major ongoing decisions. This included i.e. risks projects, sales, sourcing, investments etc. that needed to be addressed immediately and could not wait for the next Risk Committee meeting.

“The Strategic Risk Pillar”: The choices and assumptions supporting the corporate strategy were monitored and a governance was installed to ensure that the Risk Committee would be able to react immediately when critical conditions for the strategic direction were no longer true.

Impact: Reduced costs and increased benefits

The new approach reduced costs and increased the benefits of risk management at three levels:

• Operational: People spent less time on unproductive reporting and instead could spend their time addressing the real risks of the business.
• Group Risk Management: People spent less time feeling like a “post office” and instead spent more time on helping the organisation with valuable risk insights, tools and techniques for integrating risk awareness in key business processes.
• Executive: Decision-makers achieved a better overview of the persistent risk profile as well as tactical and strategic risks.