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© The Z/Yen Group of Companies 2008
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Risk management is the process of controlling risks in order
to improve performance. Risk management is one-half of Z/Yen’s risk/reward
methodology. Risk management is a popular topic and people in a variety of
fields, such as banking, insurance, manufacturing, health, engineering, defence,
the environment and the voluntary sector, are showing interest in how effective
it seems to be at enhancing performance and the certainty of performance. As an
introduction to risk management, two frameworks are worth considering in order
to get a flavour of the field, the categorisation of risk and the mechanisms for
handling risk:
From its experience in establishing risk management systems,
Z/Yen believes in an evolutionary approach towards a full, viable systems model.
Z/Yen’s problem-solving methodology, Z/EALOUS examines the environment and
objectives, analyses the risk issues, examines the likelihoods and impacts,
establishes the opportunities, promotes risk understanding and sharing. Z/EALOUS
helps clients raise risk management through four increasing levels of
sophistication:
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Awareness : the basic level consists of highlighting the importance of
risk management, establishing centres of knowledge, applying basic standards
or accreditation, and integrating risk management with corporate ‘scorecards’;
-
Engineering : at the risk engineering level, key individuals are
applying risk management techniques to larger projects or issues. Engineering
is typically offline, technical analysis using stochastic or simulation
techniques which is then brought to the organisation’s attention through
value studies or project finance decisions;
-
Comparative : where risk management is a strong feature in management
awareness and evaluation through personnel assessment, benchmarking or league
tables;
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Systemic : where a ‘viable’ risk management system provides an
internal market, external pricing and verification, dynamic re-alignment of
the risk system with strategic direction and best practice sharing through
peer review, databases and publications.
Z/Yen has helped organisations at each stage, and through all four stages.
For instance, working with a major financial institution Z/Yen highlighted the
importance of risk management in operations, proceeded to re-engineer many of
the back and middle office processes, developed risk comparators in conjunction
with the internal audit team and finally helped the organisation to develop
macro-structures such as insurance captives and re-insurance for external
pricing and verification. Z/Yen thrives on risk management problems. |
