Wednesday, 23 November 2011

CFOs, CROs, conflicting messages and strategy - FERMA paper

A couple of pieces of work caught my eye this week on the subject of risk leadership and participation in strategy, with a distinctly financial twist.

The first, a joint effort between FERMA and Finance Director Europe covers a number of themes leading on from FERMA's conference a month back. Some of this report seemed to fly in the face of best practice ERM (for example, broader strategic ERM has evolved through executives realising they need to manage downside risk better? Does it perhaps represent a little more than that in 2011?).

A FERMA board member is cited as believing risk should be "supporting strategy development" rather than participating (which would leave a CRO where exactly?). The next article indeed directly contradicts this view, quoting a risk executive who actively participated in the GRC strategy formulation for his firm, followed swiftly by the AIRMIC/Cass Business School research which bemoans the 'glass ceiling' which prevents risk managers addressing issues in a company's top echelons!

That article also has the UK "...leading the way in enterprise risk management and corporate governance" (I would probably go US and Ireland respectively with a 2011/12 hat on).

The VP of FERMA is then quoted in day-job mode  noting "risk partly about comforting non-executive directors so that they are less risk-averse" - personally I like a bit of conservatism in my NEDs, and I wouldn't like to think I am employed to teach them how to gamble! This is accompanied by the CFO of the same firm notes "the CFO and CRO may have natural conflict, the former driving growth and the latter controlling risk" - again, are Risk, as the second line of defence, really there to 'control' risk?

Finally, the CFO at Old Mutual is quoted as suggesting the complexity of proposed EU regulation (citing Solvency II specifically) might be contributing to elements of risk it is supposed to be preventing.

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