Strategic Risk Forum keynote speaker outlined his vision for strategic risk leadership at the third annual conference
“The chief risk officer job is one of the toughest jobs I know.”
So said John Ludlow, senior advisor, Alvarez and Marsal, at the third annual Strategic Risk Forum in Singapore this week.
Ludlow, also the former group chief risk officer of the InterContinental Hotels Group, was the keynote speaker at the event, held on 17 May at the InterContinental Hotel.
“You need courage, you need to be able to communicate effectively, you need to be a guardian of standards and ethics, and you need humility,” Ludlow told the audience of more than 200 senior risk managers and a selection of senior insurers and brokers.
“A risk manager who reaches out when things are going wrong and helps other leaders will build credibility and respect. No-one is going to listen to you unless they respect you,” he said.
Ludlow said risk managers needed to become a “cultural leader” in their business.
They should also recognise the rise of intangible assets, he said.
In a study of S&P 500 companies between 1975 and 2009, the percentage of a company’s intangible assets rose from 17% to 81%.
He said this change, along with innovation and disruption, presented a “great opportunity” for risk managers.
“Like every problem, it makes the risk manager more relevant; risk managers should grasp this reality with both hands and embrace it,” he explains.
‘Disruption a great opportunity’
“It doesn’t matter if you’re a taxi company and you’ve got Uber coming in, or you’re a hotel company and you’ve got Airbnb coming in, most industries are facing some kind of disruption to their business models.”
He adds: “Really it is where the chief risk officer is working with a company’s strategy teams to identify for boards the risks and opportunities in the business model, and in the wider ecosystem and economy where that business model resides.”
Ludlow says most risk managers today are too embedded in the operational and tactical risks of a business.
“I don’t think risk managers are in the boardroom enough. They tend to talk to senior leadership teams and they come out with the risk registers and heat maps and have projects and plans to improve things, but that’s typically working with senior leaders in the business,” he says.
But risk managers must move beyond this, Ludlow argues.
“The operational control framework and making sure that the business is repeatable, reliable and resilient is absolutely vital. But [risk managers’] true destiny surely lies in working with boards to help them understand how the business needs to adapt over the long term and what the company needs in terms of capabilities in the future so that it’s still resilient and successful and positioned well for that environment,” he says.
Ludlow said as risk managers move from an operational to tactical to strategic risk focus, their perspective, audience and language needs to change.
“At an operational level you’re focused on the front line and you’re talking about the physical realities of life. When you step up to the tactical world - the world of senior managers - the language is going to change and what you’re trying to achieve is going to change; it’s a much more commercial world and money is the currency here. At the board level the audience is partners and investors, the focus is the business model and the currency is trust and reputation.”