A risky situation

Apathy and a lack of understanding has sidelined risk management in the past. Iliyas Campbell says now is the time a renewed focus.

What are the main drivers behind the rise to prominence of risk management strategies?
The main driver has been the need for compliance from the financial services industry. With the implementation of stronger regulation across the region a higher level of risk management was required. Prior to this, with the exception of some of the financial industry, the risk management function within many organisations was at a much-reduced level. All industries have taken stock of recent events, including the main conflicts in the region and the economic crisis. Businesses are now beginning to realise that the risks of doing business with external organisations and the financial, physical and reputation risks that they can attract can be as critical as the direct risks that the business has identified as part of their own specific assessments.

What effect has the global economic crisis had on risk management strategies – for both companies based in the region and overseas businesses looking to invest?
Over the past decade we've seen the risk management function in many organisations being sidelined and in some cases ignored altogether. This was quite bluntly confirmed during recent workshops and seminars in the region where managers of these functions expressed their frustration at their organisation's inability to accept and understand the risks to their business. We know from working with other clients that this is a global phenomena, not simply restricted to the region. What we are seeing now is a renewed focus on risk management as the compliance process forces business to provide a specific and auditable risk management process and the effects of the economic crisis fuel deeper analysis of the business risks. This is true for business in the region and foreign investment where the increased demand for due diligence is evident.

What are the main challenges that organisations face today when assessing risk?
Part of the problem stems from a lack of understanding of this business function. There are also biases and perceptions of risk that effect not only the process of assessment but also the decision making process that follows that can be ingrained within an organisations culture. This is one of the reasons that a consultant, from the outside looking in, can often identify risks that have become part of the business culture and may not be readily identifiable by those within the organisation. Possibly the greatest challenge is for those in charge of the risk management function to provide a clearer understanding of their function and value to their management and not to see the unit solely as a cost centre. This is essential if they are to be taken seriously and included as an integral part of the business process in the future rather than being sidelined and potentially exposing the organisation to increased risks.

Do you have a recent example of how your services benefited a client operating, in the region?
We have noted a rapid increase in the amount of due diligence and risk analysis being conducted within the region. Whilst one may comment that this increase in necessary given the current crisis, it could equally be said that it should have been at this level prior to the crisis. The past year has seen numerous clients renewing their risk assessments in the region and conducting increased due diligence on vendors, partners and other third party's involved in their business process.

One client in particular was able to negotiate a reduction on their insurance premiums based on the latest risk assessment complied for them that will amount to a significant figure over the coming years. The insurance company accepted the reduced premium after the client had shown that they had clearly identified the risks to the business noting a reduction in some areas, and having made allocations and planning to mitigate the risks.

Iliyas Campbell is the founder of Diligence Management Consultants in Abu Dhabi. Living and working in the Middle East for 14 years working with a number of global consultancies prior to establishing Diligence, Campbell has an MSc in Risk, Crisis and Disaster Management from the University of Leicester.