European Risk Management Practice by shg66695

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									               European Risk Management
                       Practice:
                        Where are we and where are we heading to?
                                      Dr. M. Dequae

                                   IV   international professional forum
                                              Moscow 30.05.06



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    1.       Overview evolution
    2.       Where are we today?
    3.       Options for further development
    4.       Ferma actions:
                 •      ProRim
                 •      Benchmark Survey




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                                            1. Overview evolution

    • Change in risk management
          – in theory
          – in practice
          – from compliance to adding value
    • Reasons for this change
          – Regulatory initiatives
          – Corporate collapses
          – Changing attitudes of directors
    • Risk management as
          – a genuine discipline
          – a priority on the corporate agenda

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                                            History of risk management practice
                          PAST                                          PRESENT
  Insurable and financial risks                           Operational, strategic, financial and Insurable
            « Hazard Risk Management »                             risks
                                                                   « Enterprise Risk Management »
  Focus on preservation of                                Recognition of the value of
           “tangible assets”                                       « tangible and intangible assets »

  Each department/function manages its risks              Coordinated at highest level within the
          independently                                            organization
          «silo approach »                                         « Integrated approach »

  Risk Management =                                       RM is everyone's daily concern
          « separate function within the                           « embedded in the operations »
          organization»
                                                          Considering all business uncertainties
  Focused on avoidance of negative events                          « risks are threats and
           «risks are threats»                                     opportunities » « business risk
                                                                   management »

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                                                        Loi de Sécurité Financière (F)

    Comm. CBFA, FEB, Euronext
   (B)                                      2004          Plan d’action Corp. Gov. (CE)
    Comm. Tabaksblat (projet) (NL)
                                            2003              COSO – ERMF
         US Sarbanes-Oxley Act (EU)
                                            2002           Risk Mgt. Standard FERMA
     Groupe travail AFEP, MEDEF (F)
                                            2001                JIS Q 2001 : 2001
                                                            Basel II (fin. Inst.)
                                            2000
     UK Combined Code, Turnb.
                                            1999              AS / NZS 4360 : 1999
   US Blue Ribbon Comm.
                                            1998                KonTraG (Germany)

     Peters report (NL)                     1997               CAN / CSA Q850

                                            1996           Rapport Vienot (F)
     COCO report (Can.)                     1995          AS / NZS 4360 : 1995
     DEY report (Can.)                      1994
       COSO report (US)
                                            1992
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                                                 2. Where are we today?

    • Key activities of risk management:
          – See risk management process
          – Evolution from business risk management organisation over assurance
            to disciplined risk management organisation
    • More global approach to all risks (not only insurable risks):
          – Enterprise risk management
          – Business continuity planning
          – Supply chain risk management
    • Risk management in most cases reporting to CFO (not directly to
      board)
    • Changing role of internal audit:
          – Increasing scope for assurance (see IIA guidance)
          – Risk mapping (also as basis for risk based auditing): supporting risk
            management
    • New organisation put in place to respond to a changing external
      environment

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                                            3. Options for further development


    Two options for further development in risk
       management possible, with focus on:
    1. the hard changes, into a performance risk
       managed organisation:
          •       more quantitative & qualitative risk management
                  techniques
    2. the soft changes, into an embedded risk
       managed organisation:
          •       embedding risk management practice in
                  management culture
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    • Both are a challenge: shift in mindset from risk
      management
          – needed as a compliance activity, to
          – contributing to value and business success
      Purpose is to link risk management with future
      business success.
    • Risk managers will need for more expertise in
          – business management
          – risk sciences (financial & engineering)
         to complement focus on audit and operational
         risk

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        The disciplined risk management organisation
                          hurdle                                Characteristics



                                                   •      Dedicated resources for ensuring
                                                          high standards of risk management
    •    Risk management is not a                         practice
         specialist activity                       •      Consistency of approach across the
    •    It is done differently in different              whole business
         functions                                 •      Risk management a high priority for
    •    It is not a core part of how we do               the executive
         business                                  •      Risk management becomes a core
                                                          management process and activity
                                                   •      Central oversight and direction from
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        The performance risk managed organisation
                          hurdle                             Characteristics




    •    Risk management has no                 •      Quantitative & qualitative risk
         contribution to make to the                   management techniques applied to
         business strategy                             strategic and business planning
    •    Risk management is more of a           •      Senior specialist risk management
         cost than an investment                       resources (Chief Risk Officer)
    •    Risk management does not help          •      Demonstrable returns to
         the executive to make decisions               stakeholders for risk management
                                                       investment
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        The embedded risk managed organisation
                       hurdle                            Characteristics




                                             •     Risk management is an accepted
 •    Risk management is done with                 personal performance measure
      some reluctance                  •           Limited reluctance or challenging of
 •    It is done in addition to normal             risk management requirements
      working practices                •           Self-improvement through sharing
 •    It consumes valuable management              of best practices
      time                             •           Cross-functional risk management
                                                   forums
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                                      4. Ferma actions:
                                                ProRim
                                            Benchmark Survey

                      see more on www.ferma-asso.com




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                                            PRORIM        (professional in risk management)



    • E-learning course realised with the financial support of
      EU’s Leonardo da Vinci programma
    • Will be commercialised in the second half of 2006

    PRORIM is:
    • A combination of 6 distance learning modules and a 1
      day programme.
    • Based on the Risk Management Standard
    • Interactive, practical & very relevant to today’s needs
    • Very user friendly
    • Easy to customise for each country

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                                             PRORIM’s modules :
                                                                 Sales &
                                                                Marketing
                                                           Business
                                                          Continuity
                                                      Human
                                                     Resources
                                                 Finance
                                            Strategy

                  1 day training

Introduction
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                                            Ferma Benchmarking survey 2006
                                               on risk management practices

  The latest trends in risk management. This is for you, risk
  managers.
  • The latest assessment of European practices
  • New corporate governance trends
  • The Risk Management process, function and reporting
  • The major evolutions in insurance practices
  The Risk Management survey starts in March 2006!
  Don’t miss to answer!
  Results will be available and presented at the FERMA Seminar in
  Brussels on 11th October 2006!
  Free registration – Members of FERMA risk managers only
  Book the date in your diary now!

  With the support of Ernst and Young and AXA Corporate Solutions
RISK MANAGEMENT: DECISION FOR RUSSIA 2006       30.05.06                  17

								
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