Amrae president, Brigitte Bouquot, warned risk managers at this week’s conference that they must adapt to stay relevant to their businesses.
The risk landscape is fast-evolving and risk managers need to change the risk management model to get a grasp of the challenges, argued Amrae president Brigitte Bouquot in her opening speech at this week’s conference.
Populism, political uncertainty, climate change, advancements in technology, and a highly regulated environment are five challenges that are causing “a crisis of confidence” in the business world, according to Bouquot.
Addressing more than 2,500 delegates at the 27th Amrae Rencontres in Deauville, Bouquot said: “The world has profoundly changed in the past two years. It is still a promising world, but one torn apart by the rise of populism; Europe has been challenged on the brink of a major deadline; France has come to an inflection point, perhaps even a breaking point and 2019 will be a decisive year.”
The Amrae president pointed to five risk challenges creating a crisis of confidence in the industry.
She said that the situation is grave and that society is “in the midst of a crisis of confidence”, which has shaken political and economic models across Europe.
She pointed to the challenges of climate change and technology as two other major issues facing risk managers in 2019.
“[The world] faces two great challenges that will determine its future. On the one hand, the challenge of climate-change and the ecology of a now-limited planet; on the other hand, humanity’s challenge – our challenge – of mastering technology, in all its extraordinary power,” she said.
Time for a change
But these are not the only challenges that Bouquot highlighted in her opening speech. She also argued that increases in regulation are leaving businesses more exposed to risks.
“Self-protection, for businesses, also means being aware of the rise of regulations – in this regard, 2018 saw the Sapin II law enter into force, along with the General Data Protection Regulation,” she explained, “and businesses must also protect themselves from trade wars between nations, and the arsenal of sanctions this implies.
“Businesses are reviewing their structures and practices to bring them into accord with legal compliance – zero-tolerance is the watchword here, at the risk of breaking the law.”
Her answer for dealing with these threats? Change the risk management model.
She said: “I believe we have to invert the Risk Management paradigm”. And argued that risk management should not be about wariness about the world but rather the method by which businesses can plan for the future, particularly when it comes to sustainability.
”Risk management has become the guiding principle of businesses taking action for a sustainable world, a better world… risk management has become the foundation on which trust is built.”
”We transform ourselves when faced with a risk, and we cannot successfully transform ourselves without managing the risks this involves…. In an uncertain world, the Risk Manager has become essential to business resilience.”
Get a grip
Risk managers were also urged by Bouquot to get to grips with the issues that are forcing businesses to transform their strategic models and operations – or risk losing their value.
She said there were several levels of business transformation that must be understood and managed.
The first is fighting off competition by changing to ensure future relevance: “On the first level: a business transforms itself so it won’t die out when faced with the lethal risk of competition. Here, we see a business’s vital “risk-taking,” its creative force, its contemporary strategic transformation under the effect of the digital revolution, which has knocked down technological barriers.”
So, the consideration for risk managers? Challenge with the following questions: “What is my product, my mission? What is its value contribution? This is a matter of seizing strategic opportunities and cutting away from bad risks, to determine a “risk appetite” level.”
The second business trend is globalisation, and the growing complexities of managing interconnected risks.
“A business becomes conscious of its complex interdependency with its ecosystem, its security, its exposure to systemic shocks: terrorism, natural disasters and cyber attacks, and, ultimately, geopolitical threats in a once-again dangerous world
“Here, the question is ‘how’ – how to operate better, how to keep from destroying value in the very act of trying to increase it.”
Businesses must structure themselves to operate better. They must be connected and agile, she says, “all while weathering virtual and real-world shocks, which recall us to ourselves, viaducts, fires.”
This is largely connected to directors’ and officers’ responsibilities. She warns of the risks of high-pressured objectives to maintain business performance to “avoid disappointing shareholder expectations.”
Her concluding words for risk managers: risk management must be holistic: “risk-mapping cannot be cut up into pieces.”
“Risk management became a “battle” to obtain the necessary resources for prevention, that is, to allocate, “at the source,” a portion of future competitive advantages. No longer only technical, risk management is now forward-looking and ethical. Risk managers are now connected with directors.”