ACCA holds meeting on Risk and reward

With the global economy climbing out of their downturn, it is timely to examine what needs to be done to prevent the recurrence of the problems that have been seen in recent years. In such a context, the challenge for responsible businesses is to find ways to ensure that the rewards it seeks are supported by sensible management of the risks that confront it.

The Association of Chartered Certified Accountants (ACCA) and Echelon, recently conducted a CEO's Breakfast Meeting on this topic, urging the business world to focus on and give more attention to this issue. Based on their new report, 'Risk and reward - tempering the pursuit of profit' , the discussion looked at where the financial system went wrong prior to the financial crisis and discussed how companies should approach the many risks they face, with particular emphasis on the crucial issue of reputational risk management.

Taking part in the discussion was it's key note speaker Dilshan Rodrigo, from Hatton National Bank PLC, who is a veteran on this subject . He pointed out that ,"Companies are struggling to strike a balance between taking on too much risk to meet the ambitious demands of their shareholders, and violating their ethical principles and integrity - the two conflicting components that sparked off the recent financial crisis. Many firms have set up risk management departments to shape the direction of their investment plans. Therefore "risk appetite' in this sense is not a matter of personal preference but the important considerations which should be objective factors such as the organization's reserves, flexibility, and management skills, the returns available, the needs of stakeholders, and the actual risks involved. Personality should not play a part."

Rodrigo further stated that "For risk management to gain sufficient attention in an organization, it must be led and supported by the most senior levels. Risk management should be the role of senior management, elevating the authority of risk management and allowing this risk focus to filter through the organization to build a pervasive risk culture.

The board should also exercise appropriate oversight of risk; this is often accomplished through an audit or risk committee."

Rodrigo further affirmed that "Risk can never be eliminated from business and it would be wrong for regulators or governments to think they can do so. Risk created opportunities and should be managed, not removed. Therefore companies should strike a careful balance between centralization and decentralization of Risk."

He concluded by saying that "Risk Management Systems should be adaptive rather than static. Assumptions about risk should be questioned and updated, feeding observations from the real world back into the system on a regular basis. This enables risk management to correct inherent weaknesses and recognize and respond to changing business conditions."

A panel discussion followed, by well known personalities from the industry that included Suren Rajakarier - Partner KPMG, Surana Fernando - Director Supervision- Securities & Exchange Commission of Sri Lanka (SEC),Mukhlis Ismail Assistant Vice President Head of Group Business Process Review - John Keells Group and Adrian Perera Chief Executive Officer- RAM Ratings (Lanka) Ltd. The panel discussion was moderated by Shamindra Kulamannage Editor-in-Chief of Echelon.

Muklish Ismail touched on many areas pertaining to the topic that consisted of his own experiences in successfully managing risk in his organization .The panel was of the opinion that those in governance roles should explicitly understand risk appetite when defining and pursuing objectives, formulating strategy, and allocating resources.