Enabling the First Line of Defence

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 number one priority.

Today, managing risk intelligently is everyone’s responsibility — not just the executive group of the company.

As risk responsibilities move to the front line, organisations will need to review how their risk framework can be adapted to the change. To really equip everyone to confidently handle risk, the management of risk needs to be more intuitive. Also, data and analytics can play a huge role in making the process more collaborative, measurable, and strategic. Backed by technology, many firms today are not only able to prevent downside risks, but also have capitalised ahead of the curve on new markets, opportunities, and changes in demand.

The question of how we enable risk management at the front line of defence (FLoD)  was a key theme for Marsh’s ‘Enabling the First Line of Defence’ panel discussion at RIMS India 2019. 

Panellists expressed that currently risk management was not at the forefront of the minds of frontline staff like sales executives, who are more likely to be encouraged to meet sales KPIs, for instance.

Reflecting on his time within financial services, panellist Sudip Basu, Hinduja’s Group Head of Risk, expressed that during peak times risk was not a great consideration, and rarely outweighed the quest for glory. Navel-gazing, of course, happens during downturns, which the sector has experienced over several tumultuous decades, both in India and globally. Basu highlighted that this was definitely the case after the global financial crisis.

Remaining on the front foot is key to risk management. A number of proactive strategies for enabling the frontline came to the fore during the discussion.

Bake into KRAs

One key activity that was flagged at the panel discussion was baking risk management into key responsibility areas (KRAs). This definitely speaks to the cascading of risk management messaging down to the frontline and into activity. However, concerns were expressed about the level of monitoring being implemented alongside these KRAs. Essentially, the follow-through on good intentions was held into question and highlighted as an area of development paramount to success.

Celebrate successes

As well as baking risk management into KRAs, firms need to support best practice in order to bring about credible change at the front line. Celebrating success is far from an unfamiliar concept within firms, though how success is measured and at what level may need to be redressed.

According to panellist 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 are less so when it comes to recognition for front line teams. Sharma believes it would be beneficial to build in small acknowledgements for front line teams and employees who have exceptional work, have been proactive, or have demonstrated best practices when it comes to risk management. Acknowledgement is a very important tool.

Acknowledge incremental gains

The third enabler that was raised during the panel discussion was incremental gains. A step-change in the perception of risk management on the front line is not likely to happen overnight. If only key milestones or large events are recognised, 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 enables the journey to success to be viewed as progressive, and could help FLoD initiatives to more easily gain momentum.

While the FLoD is traditionally associated with operational management, risks are growing increasingly complex and interrelated risk management is no longer the purview of control functions alone, particularly in broad economic environments or those with major regulatory influences. Ensuring that there is adequate awareness on impact of risks — while rewarding successes across various levels of the organisation — is critical for organisations to cope with risks in the current business environment.