The headache of how to update a company’s risk management procedures in the wake of recent events shows no sign of abating. Emerging risks, systemic risk, risk management effectiveness, developing a new risk culture — these are all issues which senior management is having to devote considerable brainpower towards.
It’s worth however going back one step and remembering that risk stems from change. That’s why companies should ensure that their critical activities are correctly aligned, regularly reassessed and able to identify and cope with the possible effects of change. The misalignment of such activities poses an enormous threat to any business and is potentially the greatest risk of all — as Mike Nolan of KPMG’s Advisory practice explains.
One key learning point which I will be taking from this credit crisis is the danger of misaligned management activities.
The current discussion about risk should not be just about risk management. It should also consider the alignment of critical business processes such as strategy, goals, incentives, performance metrics, controls and risk. At its most basic level, consider what happens when strategy looks in one direction but incentives encourage movement in a different direction. The difference between the two positions poses a risk to the future health of the business.
See full Press Release.
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