Prof. Anthony Minnaar recently hosted an international guest at UNISA to discuss enterprise risk management.
Stakeholders in the security industry were recently invited to attend a presentation at UNISA on enterprise risk management (ERM) by Dr Alison Wakefield, a senior lecturer in Security and Risk Management at the University of Portsmouth. Wakefield, an academic criminologist, who also authored the book, Selling Security: the Private Policing of Public Space (Willan Publishing, 2003), among others.
As ERM is a reasonably new concept to the industry in South Africa in general terms, it was an opportunity international thoughts and perspectives on just what this concept entails.
For those unfamiliar with ERM, a brief definition is as follows: ERM and strategic risk management are corporate-wide, as opposed to departmentalised efforts to manage all the firm’s risks – in fact its total liability structure – in a way that helps management to carry out its goal of maximising the value of the firm’s assets.
According to Wakefield, ERM today has been driven by both major financial scandals (and subsequent new corporate governance rules), and the greater priority being given to business continuity and crisis management post-9/11.
On the matter of risks to consider when looking at an ERM approach, both internal and external points warrant consideration and analysis. Examples include:
* External: market, eg, sectoral trends, such as taxation or interest rates, exchange rate changes and environmental, eg, political instability and climate change.
* Internal: organisational capabilities, eg, adaptability of structure or culture to change, presence of early warning systems as well as the organisational resistance of criminality.
Wakefield listed a number of questions that an organisation needs to ask itself pertaining to ERM – an ERM approach involves the ability of a corporation to answer ‘yes’ to questions like:
* Does your organisation think deeply and broadly enough about uncertainty and take steps to manage it proactively and systematically?
* Is your organisation using the results of holistic analyses of uncertainty to influence strategy and business development?
* Are you sure that all the most significant threats and opportunities facing your organisation are being managed effectively?
* Are you confident that your business is likely to survive major external changes in future?
* Does the board make enough time for understanding risk?
* Does it give good risk leadership to the organisation?
* Do you have an effective central risk function that attempts to ‘see the whole picture of risk’?
* Is there an adequate system for spotting emerging threats and opportunities in time?
* Is there clear and regular communication on risks throughout the organisation (up, down and sideways) within an appropriate risk-aware culture covering both threats and opportunities?
* Is your system of risk governance good enough?
Some ERM-associated challenges (both positive and negative) that have been noticed, include growing pressures to implement ERM from investors, while actual corporate take-up tends to vary by sector, company structure, business culture, etc. Following this, it is rather difficult to evaluate actual effectiveness of how it is being managed, especially if it does not have some formality in the structure of the business. It needs to be born in mind that ERM does not exactly eliminate risks, it just allows for their projection, consideration and associated planning. Additionally, human error, circumvention of controls or even management may override ERM decisions – the risks are not objective and are constantly changing.
In summary, and as per Wakefield’s conclusions, ERM can be said to offer the holistic, strategic and longer-term approaches that are increasingly required in the current climate. This requires enormous organisational commitment. It is, however, clearly in the corporate security officer’s best interest to embrace ERM as “they have much to gain by being at the forefront of such developments”.
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