Before the first 2010 AFL Grand Final, St Kilda coach Ross Lyon talked about the "What If" meeting he always holds on the morning of a game. AFL clubs plan to succeed.  They understand that succeeding involves developing strategies, understanding risks and being prepared in advance to respond.

Businesses and individuals have two choices, sit back and react to whatever hits them next - and yet, we know that future change and uncertainty is a given.  The alternative is to actively scrutinise our business models and processes, seeking out opportunities and identifying potential pitfalls.

The best management tool for scrutinising and scenario planning is Enterprise Risk Management.  This is not a new concept, but is certainly a poorly implemented or under utilised mechanism for managing a business.  Being part of the world economic order requires an effective and vigilant approach to risk management. The emphasis being on ‘effective'.  All too often organisations conduct risk assessments as an annual event or to meet a regulatory requirement.  They fail to realise the value of the risk management process or fail to identify improvements to operational processes.

What is your response to these common risk management pitfalls:

•·         A lack of strategic risk consideration

Do you know the key risks to the achievement of your business strategy and how these risks are managed?  This critical link is often overlooked by business as it is deemed too difficult or the focus is immediately on operational day to day type activities.

•·         A lack of scenario planning

Either positive or negative do you plan for the unexpected?

•·         Poorly defined operational risks

How well do you understand your value or supply chain, critical risks and key controls?  Are you both pro-active and re-active in responding to the unforeseen?

•·         Restricted thinking

Do you think outside the square?  How will you be impacted by catastrophic failure or events impacting on your suppliers, customers or business environment?

•·         Risk management is not being used as an integrated tool

Are you continuously reviewing your risks and responses or is it reviewed annually or once in a while, by a selected few and often only senior individuals? 

Effective risk management is not a DIY type activity. It requires a disciplined, systematic and patient approach to be successful.  Effective risk management is the most important tool available to management, it not only forms the basis of effectively leveraging other tools such as audit, assurance and self assessment but drives growing and sustainable businesses.

Through effective risk management, you can also kick goals!

Stephen Tiley

Principal, Risk and Internal Audit