The risks of CEO risk management

by Evan Davies, Chief Executive - VIC, QLD & NZ | |   Finance and Risk
The Risks of CEO Risk Management

Risk management is 'everyone’s business'. Companies should be working to advance a culture of risk management across the organisation to a point where it's used effectively and consistently in decision making.

In a recent CEO Institute Syndicate meeting, a guest speaker said he was asked to review an organisation’s updated risk register. He commented that what he saw was a sound, comprehensive piece of work. He surprised the gathering by stating that the register greatly missed the point. In explaining himself, he said that it was mostly about catastrophic risks and primarily about risks to avoid. As quoted, "sure these are important and easy to visualise, like exploding drilling platforms (BP), beef patties made from horse-meat (UK supermarkets) and hacker attacks (Sony Pictures) to mention just a few."

The danger for managers is these sorts of risk are so vivid, they distract attention from a different type of risk. Our guest then quoted Theodore Roosevelt...

‘’Far better is it to dare mighty things, to win glorious triumphs even though checkered by failure than to take rank with those poor spirits who neither enjoy much nor suffer much because they live in the grey twilight that knows neither victory nor defeat. Risk is like fire: If controlled it will help you; if uncontrolled it will rise up and destroy you.”

Our speaker said, the risks which will kill us are the ones we don't know we aren't taking. Specifically, it is the risks we ought to be taking in order to move the business forward, but are not. New products, new markets, new processes or changed business models. We need these to secure the business long term. These can be hard to notice when we aren't taking as many of these risks as we could, or should. We can identify risks in what we currently doing, or in proposals put forward, but what do we know of proposals that aren't put forward?

All activities undertaken must be consistent with our organisational values, objectives and strategic plan. While we avoid activities that result in undue or unreasonable risk, achieving goals often requires innovation and new or novel practices.

He suggested that a Risk Appetite Statement is needed to set out the core principle of the enterprise, interests of stakeholders and the relationship between the organisation and its stakeholders. The company should always be averse to risks that materially affect these matters.

With the above exceptions, business should be open to accepting varying degrees of managed risk to achieve its objectives. By recognising and analysing the operating environment, business can identify and manage risk on a considered, informed basis. Often Boards have a view that risk appetite should vary across different risk types.

Our speaker suggested tying a key performance area to the businesses appetite: -

  • Strategic: consider all strategic options and select one most likely to result in successful achievement of critical success factors.

  • Financial: a stable, strong financial position allows the undertaking of business plans and protect financial assets; provides reserves if adverse operational and financial environments.

  • Reputation: integrity and competence shouldn't be compromised; no incidents involving major breaches of integrity, ethical or professional standing. Activities undertaken mustn't compromise the business’s reputation.

  • Operational: efficiency is a high priority to maximise the ability to pursue objectives. Efficiency is within business’s control and should be a strong focus for all staff.

  • Regulatory, compliance & legal: have low tolerance for compliance breaches.

  • Workplace health & safety (WHS): no reason for health or safety risks. Policies and procedures must be kept up-to-date and periodically reviewed. Managers must ensure staff are aware of and understand business’s WHS policies and procedures.

Companies should be working to advance a culture of risk management across the organisation to a point where it's used effectively and consistently in decision making. Risk management is 'everyone’s business' - Board, managers and staff at every level.

The CEO Institute was founded in 1992. It is now Australia's leading membership organisation for CEOs and senior executives. It provides a forum for over 1,000 Chief Executive members to connect and share their learning with each other. In 2011, The CEO Institute became the world’s first global certification body for CEOs, and in 2013, partnered with UNESCO in support of the "Malala Fund for Girls' Right to Education". In 2014, they began offering their programs globally.

The CEO Syndicate is an exclusive peer support network for CEOs. The first meeting of The CEO Syndicate program was held in Melbourne in June 1992. Offices were opened in Adelaide in 1996 and Sydney and Brisbane in 1997, with Perth launching in 2007. In 2015, the New Zealand office opened.

The Future CEO program is a certification course designed by the business leaders of today for the business leaders of tomorrow. The first Future CEO meeting was held in Melbourne in May 2012. In 2014, the "Future CEO Scholarship Fund for Women" was established, and continues to be offered today.

Membership of The CEO Institute is by invitation only. To register your interest click enquire.





Write new comment

45575490549154925482 5483 5175
preload 0preload 1preload 2preload 3preload 4preload 5preload 6preload 7preload 8preload 9preload 10preload 11preload 12preload 13preload 14preload 15preload 16preload 17preload 18preload 19preload image 1preload image 2preload image 3preload image 4preload image 5preload image 6preload image 7preload image 8preload image 9preload image 10preload image 11preload image 12preload image 13preload image 14preload image 15preload image 16preload image 17preload image 18preload image 19preload image 20preload image 21preload image 22preload image 23preload image 24preload image 25preload image 26preload image 27preload image 28preload image 29preload image 30preload image 31preload image 32preload image 33preload image 34preload image 35preload image 36preload image 37preload image 38preload image 39preload image 40preload image 41preload image 42preload image 43preload image 44preload image 45preload image 46preload image 47preload image 48preload image 49preload image 50preload image 51preload image 52preload image 53preload image 54preload image 55preload image 56preload image 57preload image 58preload image 59preload image 60preload image 61preload image 62preload Themeimage 0preload Themeimage 1preload Themeimage 2preload Themeimage 3preload Themeimage 4preload Themeimage 5preload Themeimage 6preload Themeimage 7preload Themeimage 8preload Themeimage 9preload Themeimage 10preload Themeimage 11preload Themeimage 12preload Themeimage 13preload Themeimage 14preload Themeimage 15preload Themeimage 16preload Themeimage 17preload Themeimage 18preload Themeimage 19preload Themeimage 20preload Themeimage 21preload Themeimage 22preload Themeimage 23preload Themeimage 24preload Themeimage 25preload Themeimage 26preload Themeimage 27preload Themeimage 28preload Themeimage 29preload Themeimage 30
Not rated yet.
Please confirm
Previous Next Hide preview images
Close webpage preview
Loading preview ...
Upload photo Upload pdf
Loading preview ...
Preview of your uploaded image Cancel image upload
*: required field
Preview Comment
Close comment preview
Cancel reply
Your comment will be a reply on the following comment:
Data protection and disclaimer
Data protection report - 27.4.2017, 05:06:31
Https is not enabled
Database is on the same server
Cookies can be refused or accepted AcceptRefuseCookies are accepted Cookies are not accepted
Search engines are allowed to index comments
Data protection is low (25%)
Software declaration
This software has no known backdoors or vulnerabilities that allows third parties access to your data. More about data protection with this commenting- and rating-system:

No comments


Let us know your enquiry