The noon panel at GARP discussed risk and performance management, with a diverse set of participants, including representation from Hess, Swiss Re, and Vanguard.
Kanwardeep Ahluwalia from Swiss Re noted that many companies are going through a derisking process right now. However, Ahluwalia cautioned that companies need to be cognizant of how much they are paying to reduce their risk. In many cases, especially now, it may make more sense to manage the risk internally to maximize performance.
What is the role of risk management in the budget process? Panelists suggested that during the budgetary process risk management should step up and call out inconsistencies between risk and performance goals. The moderator, Kevin Buehler from McKinsey, noted that many times he has found that companies in trouble have misaligned expectations between risk and reward. For instance, a company may have aggressive revenue goals to take share in a particular (emerging) market, but those goals may in conflict with a risk adjusted return on capital. However, he said that typically risk management does not normally win out in a conflict in which the CEO is on the other side, but you have to force the dialog.
Jonathan Stein from Hess argued that risk management needs to move beyond the Be Careful mantra and move into recommendations for risk mitigation. He talked about the importance of developing scenarios that help define triggers risk mitigation actions.
In general, the message from the panelists was that deeper interaction with the business allows risk managers to be more effective. This includes everything from designing risk management processes around the way the business makes money to prompting a dialog at the executive level when risk and performance expectations are not aligned.
Tags: GARP Live Blogging