Being the concluding part of the text of the 25th LASPOTECH inaugural lecture series delivered by Mrs. Adeola K. Banjo, a chief lecturer in Insurance Department at the LagosState Polytechnic recently.(The fourth part was published yesterday, Thursday, December 29, 2011).CORPORATE RESPONSBILITY FOR RISK MANAGEMENTFor Risk Management to be effective within an organization it needs to be promoted by the organization at all levels and integrated into the culture and day-to-day operations of the organization.Hug Back, (1999:142), highlights Mechanism for managing risk as important components of every organization's philosophies, goals and accepted practices. They should be reflected in its business plans and training programs.Organizational culture is likely to be a severe impediment to the implementation of risk management programmes and top Management Team will need to be aware of this and introduce measures to change the culture where and when necessary. Typical measures that could be applied include:' empowering managers / departments at all' levels to manage risks;' acknowledging, rewarding and publicizing' effective risk management practices;' providing opportunities for staff to discuss' options for avoiding risk management practices;' focusing on positive results rather that minor' negative ones;' fostering learning from both positive and' negative results; including unexpected or' untoward ones; and' avoiding the re-introduction of restrictive controls.According to Sanusi (2011:55),Risk Managers of banks and other organizations must ensure that they comply with international best practice in carrying out their risk functions.Sanusi further said that:The important thing to learn from the past and avert the danger of the Past is to try to be vigilant Risk Managers ahead of any situation, so as to guide one institutions, our financial sector, and Economy as a whole.Abolo, (2011:55) in his address titled, 'Recent Market Turmoil: Re-thinking the role of Risk Managers in a Changing World', noted that 'failure of financial Institution was caused by failure to Adhere to Risk Management Principles'.BENEFITS OF CORPORATE RISK MANAGEMENTTo be effective, risk management should be an integral part of everyday business management. A regular and robust process should identify and manage acceptable levels of risk before they turn into disasters. Without a robust procedure for identifying and dealing with risk, the information, reputation and finance of a business are all in danger.According to David, (2001),The alternative to risk management is of course risky management. Different types and sizes of organization all demand a different approach to risk worries. Financial services companies for example, have a particular sensitivity to the ongoing confidence of the public.An understanding of risk tolerance levels and any special sensitivities will therefore help an organization develop its business strategy. This will have an impact on the way it undertakes its business objective, the resources it chooses to use and the way in which those resources are used.Lack of proper risk management leads to crisis management.According to Marshal, (1969), risk management can contribute to the organisation's general goals in several ways:' Guaranteeing survival of an organization' The first and most important one is in guaranteeing that the organization will not be prevented from pursuing its other goals as a result of losses associated with pure risks.Profit ContributionRisk management can contribute directly to profit by controlling the cost of risk for the organization.Reduce Corporate ExpensesRisk management can also reduce expenses through risk control measures. To the extent that the cost of loss prevention and control measures is less than the amount of losses that are prevented.Increase IncomeRisk management can, in some instances, increase income. It has been argued that the total amount of risk that an organization faces is important, since firms with higher total risk are more likely to find themselves in financial distress than firms with lower total risk.Risk awareness of significant riskThe biggest danger to a business is failing to identify a risk until it is too late. This can be costly in term of reputation, security, money and internal morale. Early identification of threats empowers a business to categorized and prioritized risk and to deal with them in a timely and effective way.Recognition of responsibility and accountabilityHaving identified possible risk, a business can then assigned the most relevant party (internal staff or external expert as appropriate) to deal with them. A strong risk management process will ensure that once assigned, a risk can be tracked to ensure it is dealt with on time and effectively.Identification of new opportunitiesIdentifying and dealing with risks often present a company with new opportunities that would have otherwise gone undiscovered. Effective risk understanding and risk management procedure can cause an organization to take valuable opportunities.Enhance corporate communicationThe need to deal with risk in an effective manner instills a culture of communication throughout the organization, it also encourages better communication from management board to stake holders with the news of how risk are being better managed.Remove fearUnderstanding risk to which an organization is exposed to and the impact precisely, then managing that risk, can remove fears that would otherwise be unacceptable to the board.CONSEQUENCES OF NOT MANAGING CORPORATE RISKAccording to Walter (1993), failure to manage risk effectively can lead to such adverse consequences as:' financial losses by the organizations;' personal injury' community losses;' loss of professional or technical standing;' criminal charges;' environmental damage;' public health crises;' claim for damages;' failure to recognize and take advantages of opportunities;' failure of a project to reach its objectives;' failure of physical infrastructure, equipment etc;' customer dissatisfaction;' unfavorably publicity;' a threat to physical safety;' a breach of security;' mismanagement;' a breach of legal or contractual responsibility;fraud; and' deficiencies in financial controls and reporting.This is not to say that risk management is about avoiding risk completely. It is more about knowing what the relatives severity of the consequence is likely to be for each level of management response, and making management decision accordingly in line with the principles and methodology of Risk Management.CONCLUSIONIn conclusion, Risk Management is simply, a practice of systematically selecting cost effective approaches for minimizing the effect of threat realization to an individual or the organization.All risks can never be fully avoided or mitigated simply because of financial and practical Limitations. Therefore, all organizations have to accept some level of residual risks.When an organization talks about risk management, what does it mean' According to Gartner (2008), as quoted by Amy Schurr (2008), 'many enterprises are inconsistent in the use and application of the risk management. So it's no surprise that risk management often ends up into separated into functional areas such as business continuity, security, management and privacy'.Gartner's recent reportA Risk Hierarchy for Enterprise and IT Risk Managers,' emphasizes the need for a holistic view of risk. 'An enterprise that wishes to betterunderstand and manage the risks to which it is exposed should begin with enterprise-specific risk definitions and an organizational risk hierarchy to which all risk-related specialists can align'. It is important to start from a common, overarching framework to eliminate overlap, avoid gaps in coverage and ensure good governance.In order to make risk management more effective in an organization, to ensure security and success, Gartner offers 7 steps:' implement a framework for risk assessment and mapping;' outline the responsibilities of risk managers/departments with their respective domains;' identify and define the risks to which the business is exposed and how to map incidents;' determine the threat level and focus on the risks that have the greatest potential to affect enterprise performance;' establish levels of controls for processes commensurate with the perceived threat;' record and retain risk incident and near-miss information; and' conduct periodic risk assessments to determine changes in your company's risk profile and assess performance.Finally, in addition to professional points made in the foregoing, to handle risk, we need to yield ourselves and organizations to God Almighty, the creator of heaven and earth, the one that was and is and is to come, the everlasting father, the Prince of Peace, the King of kings, the Lord of lords, the God of all impossibilities, the able God, the Protector, the Sustainer, the Unchanging changer, the one that when he says 'YES' no one can say 'NO', and when he says 'NO', no one can say 'YES', the Great I am, that according to Psalm 91, can combat the adverse effect of risks in your life and organization and grant security and success.
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