Businesses in India expressed an overwhelming desire to approach risk management more strategically in this year’s Excellence in Risk Management India report, with 68% of respondents deeming “integrating risk management into strategic planning” their top priority. Today, managing risk intelligently is everyone’s responsibility—not just the company’s executives—and the question of how to enable risk management at the front line of defense (FLoD) was a key theme for Marsh’s “Enabling the First Line of Defense” panel discussion at the RIMS Risk Forum India 2019. Consistently taking the initiative is key to risk management, and panelists discussed a number of proactive strategies for enabling front-line employees to address risk.
the First Line of Defense
As risk responsibilities move to the front
line, organizations will need to review how their risk framework can be adapted.
To equip everyone to confidently handle risk, risk management needs to be more
intuitive. Data and analytics can also play a significant role in making the
process more collaborative, measurable and strategic. Backed by technology,
many firms are now not only able to prevent downside risks, but have capitalized
on new markets, opportunities and changes in demand.
Panelists expressed that risk management was not a priority for frontline staff like sales executives, who are more likely to be encouraged to meet sales KPIs. Reflecting on his time within financial services, panelist Sudip Basu, Hinduja’s group head of risk, said that during peak times, risk was not an important consideration, and rarely outweighed more immediate profit and success motivations. Of course, self-examination happens during down-turns, which the sector has experienced over several tumultuous decades, both in India and globally. Basu said that this was definitely the case after the global financial crisis.
Risk Management into KRAs
One key activity that the panelists flagged
was baking risk management into key responsibility areas (KRAs) so that risk
management messaging cascades down to the front line and into business activities.
However, the panelists also expressed concern about the level of monitoring being
implemented alongside these KRAs, stressing the need for follow-through on good
intentions and highlighting this as an area of development needed for success.
Celebrating success is far from an
unfamiliar concept, though firms may need to address how success is measured
and at what level. According to panelist Jyotsna Sharma, Bridgestone India’s chief
financial officer and head of IT, firms are very good at celebrating risk
management successes at the senior levels, but not as good at recognizing it
for front-line teams. Sharma said that it would be beneficial to build in small
acknowledgements for front-line teams and employees who have done exceptional
work, have been proactive or have demonstrated risk management best practices.
The panelists also stressed the importance of incremental gains. A change in the front line’s perception of risk management is not likely to happen overnight. If only key milestones or large events are recognized, it could be harder to gain buy-in and ongoing support from teams on the ground. Much like celebrating wins achieved by the FLoD, acknowledging incremental gains helps the team to view the journey to success as a process, and could help FLoD initiatives to more easily gain momentum.
While the FLoD is traditionally associated with
operational management, as risks grow increasingly complex and interrelated, risk
management is no longer only the purview of control functions, particularly when
major influences from regulatory and broader economic environment exist.
Ensuring that there is adequate awareness of risks—while rewarding successes
across various levels of the organization—is critical for organizations to cope
with risk in the current business environment.