The Story of the Risk Manager’s Increasing Value Continues...

A few months ago I wrote about the rising visibility and responsibility of risk management professionals, linking to articles about the growing demand for risk training and talent. Along that train of thought, I was just able to get to this month’s edition of Risk Management, which along with a great photographic review of the last year in risk management, has an article outlining the progress the profession has made over the last decade. It’s interesting to think that 10 years ago risk management was a much smaller discipline focused on relatively narrow problems like the Y2K software flaw. Things have changed a lot.

Case in point, the SEC announced this week the approval of new rules that will, among other things, require companies to disclose the relationship between their compensation policies and risk management, as well as describe the board of directors’ role in risk oversight.

Understanding what compensation policies have a material impact on an organization’s risk and developing policies for board-level oversight of risk will require guidance from internal and/or external risk experts... good news for any risk experts who appreciate gainful employment. And of course, many additional regulations and SEC rules expected to come together early next year are also likely to continue this trend.

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Transparency and compliance . . . US Congress votes on financial oversight, and the OECD unveils ideas for new see-through fina

Today the US House of Representatives will vote on a bill bringing broad changes to financial regulations, which most experts expect will pass, pushing matter to the Senate.

As the debate continues between what’s best for businesses and consumers as we look for economic recovery, a few of the amendments expected to come to a vote today involve the creation of a new consumer financial protection agency, a Sarbanes Oxley exemption for small firms, and new power for the Government Accountability Office to audit the Federal Reserve.

While this debate is going on, the Organization for Economic Cooperation and Development released a framework last week to guide policymakers in the reform of international financial markets. According to the announcement, “Increasing transparency is key. The complexity and opaqueness of products made risk assessment difficult for firms and investors and hindered market transparency, a major cause of the crisis.”

The framework’s explanation of the financial landscape includes principles for 1) A definition of the financial system, 2) Transparency, and 3) Surveillance and analysis. Responsibilities for the collection and distribution of relevant data are described for government authorities, industry groups, and international organizations.  These principles mirror the focus of other potential regulatory changes and will have a substantial impact in the way organizations document and track a wide range of business processes and transactions if they are carried out in legislation.

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The new ISO 31000 risk management standard . . . well-written, but not earth-shattering

By now, many of you have read the newly released ISO 31000 Risk management - Principles and guidelines standard. (Others may have seen its release draft or be familiar with its predecessor the AS/NZS 4360 standard.)

It provides a well-written, step-by-step guide to risk management processes that can be applied to whole organizations, or any part thereof. So far, it has received well-deserved praise for its surprising brevity and consolidated value. These are especially important characteristics for a document with as lofty a goal as standardizing what it calls “an integral part of all organizational processes.”

But if we expect the availability of ISO 31000 to have any sort of revolutionary or game-changing impact in the immediate future, we’re getting way ahead of ourselves.

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