Risk Management is good management. It affects large and small companies alike, crosses all business sectors and allows busineses to maximise their potential.

Although risk management is a discipline that is being driven by the regulators it is important that as a business maximum benefit is derived from the implementation of robust risk management processes and systems. Latest FSA and UK regulation is being increasingly influenced from overseas. This can be seen both from Europe and America with developments such as the New Basel II Capital Accord (Basel II), the parallel initiatives from the European Union for capital adequacy (CAD 3) and the Sarbanes-Oxley Act (SOX). This means that effective risk management is at the centre of most regulation. Equally executive and non-executive directors alike are being placed under greater scrutiny than ever with the impact of the Smith and Higgs reports likely to be felt by most companies.

But effective risk management is not just about complying with regulation. It will also help an organisation to achieve its objectives by releasing capital currently tied up as reserves against potential risks for investment in developing the business.

Implementing robust risk management processes therefore falls into the mandatory category of project.

Businesses set strategic objectives and business objectives to move the business forward. In order to ensure business achieves those objectives it is important to manage the risks that threaten the acheivement of those objectives. Increased value and business success are the rewards for effective risk management. It is important to acknowledge that the role of effective risk management is to manage risk appropriately rather than eliminate it all together.

Risk manifests itself in many ways, and the effect of a risk event (happening) may not always be negative – there may be a combination of outcomes. It is vital that the processes we use to identify and manage risks are understood, robust and effective.

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