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Risk management: a permanent place on the board agenda

The Covid-19 crisis will give risk management a more prominent place within organizations. PwC expert Zouhair Taheri expects it will gain a permanent place on the board agenda.

The rapid spread of the coronavirus is a typical case of a Black Swan, an event that no one had anticipated and so no one was prepared for. The world has had to deal with this many times - think of ‘9/11’ or the 2008 financial crisis - but the coronavirus crisis is unprecedented in magnitude. The crisis does not only affect a specific country or region, but the entire world. Not just some sectors, but the entire economy, on both the demand and the supply side. Old certainties no longer apply. Zouhair Taheri: "For years, organizations have used historical data to determine the solvency of suppliers and customers. These data have now lost their validity. So how should organizations determine whether they can deliver goods on credit or pay for goods in advance?"

Taheri expects this crisis to change the risk management of organizations. "It will not only receive much more attention, but I also expect that the approach to risks will change. Risk management should support the strategic objectives of the organization and therefore be integrated into all facets of the organization. In addition, organizations can make much better use of technology and the insights data provide. We see that organizations with a mature and data-driven risk management function are much better able to respond quickly, adequately and in an agile way to unexpected events such as the outbreak of Covid-19."

From a separate approach...

  • Risk management is generally part of back office departments like Internal Audit, Finance, IT or Compliance.
  • Risk management focuses on compliance and (financial) processes. Different types of risks are managed separately.
  • Risk management is still too much a ’tick-the-box’ exercise, instead of the result of an adequate discussion.
  • Development of risk management is reactive and depends on incidents to which the organization responds.
  • As a result of tight budgets the automation of risk-mitigating measures (within and outside ERP systems) is lagging behind.

...to strategic risk management

  • Risk management gets a permanent place in the boardroom and is coordinated from there.
  • Risk management is fully integrated into the organization, and takes interrelationships and (external) developments into account. 
  • Risk management evolves continuously as new risks are proactively identified.
  • More attention for technological support and the use of data. Larger budgets for implementing new technology (Cloud, RPA and AI).
  • Risk management is directly linked to strategic, tactical and operational developments of organizations, such as bringing additional production capacity closer to home, the deployment of more flexible employees and real-time insight into performance indicators and the associated risks.
  • Risk managers are getting a different profile: data, technology and communication skills are becoming more important.

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Zouhair Taheri

Partner, PwC Netherlands

Tel: + 31 88 792 19 63

Lolke Reinstra

Senior Manager, PwC Netherlands

Tel: +31 (0)63 927 76 57

Vimal Vallabh

Senior Manager, PwC Netherlands

Tel: +31 (0)88 792 49 15

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