Smart Risk Management

3

Your Firm’s Risk Management Plan

You always get what you measure, so measure what you want to know.

After reading this chapter, you should

• understand why a firm needs a defined risk management programme.

• see how to use a risk management plan to help prevent fraud.

• be able to identify who should be the risk champion for an organisation.

• be able to help others foster a risk awareness in an organisation.

Five Stages of Crisis Management

Stage 1: Denial

Stage 2: Containment

Stage 3: Shame mongering

Stage 4: Blood on the floor

Stage 5: Solution

This describes most firms’ process for handling risk. In fact most governments follow this process too. Nothing gets better because leaders get stuck at stages 3 and 4.

Your Risk Management Program

Every firm needs a defined risk management program. With one, a firm increases its longevity and profitability. Every day, things occur that could undermine the organisation’s success. Wouldn’t it be better if an organisation’s employees were better prepared to handle those unexpected events?

Assume that a family is on holiday somewhere distant and failed to research the type of weather they might encounter. They might pack for sun, and it turns out to be cold. They might pack for outdoor activities and have to spend the entire holiday inside. This is what a risk management programme is about: matching plans with the existing environment.

In figure 3-1, a global firm-wide risk management programme consists of three prongs or strategies:

1. The first ...