Against a background of what Sir Peter Gershon describes as “arguably one of the most turbulent times we have faced for years”, board members need to constantly review their approach to, and understanding of, risk, according to a new study from a group of industry and professional services organisations.
"Ensuring corporate viability in an uncertain world - Framing the board conversation on risk", produced by The Chartered Institute of Management Accountants (CIMA), a partner of the Finance Indaba Africa 2017, and The Chairmen's Forum with Alvarez & Marsal and Airmic, identifies emerging best practice and offers practical advice to boards based on extensive consultations with senior chairmen, business leaders and risk specialists.
Sir Roger Carr (pictured), chairman of BAE Systems, said:
"The key is to manage risk effectively and boards must equip themselves better to do so. Too often process has replaced leadership and the ability to manage risk effectively in a crisis has been lost."
The report recommends that while risk started as a component of compliance it now needs to be raised to a strategic level which "leads to different conversations", particularly at a time of increasing complexity and uncertainty in global markets. With the implementation of the new reporting requirements for risk introduced two years ago by the Financial Reporting Council (FRC), boards are increasingly looking to integrate their risk management processes, ensuring that financial and risk management departments are not siloed.
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"Companies best placed to manage the complexity of the risks involved and to identify the opportunities which will inevitably arise are those who have embedded the consideration of risk in their corporate agendas and integrated the reporting of risk into their management information flows," said Sir Win Bischoff, chairman of the FRC.
The report was co-created by CIMA, but their contribution is attributed to "CGMA" (Chartered Global Management Accountant) - the designation held by CIMA and AICPA management accountants. CIMA is the world's largest and leading professional body of management accountants. Through its partnership with the American Institute of Certified Public Accountants, it supports and give voice to 150 000 CGMAs across the globe.
