THE RISK MANAGEMENT INTENSIVE^®

It is way too risky not to have an integrated, structured approach to risk

After the Global Credit Crisis all major decision-makers in the public and private sector understand more than ever that our globalized, changing world is so complex that a thorough understanding of risk analysis and management is more important than ever. In order to successfully navigate the present environment no longer can businesses afford to approach the subject of risk management in an ad-hoc or reactive manner.

With tremendous volatility in financial and energy markets being an important factor in explaining the growing complexities of today’s business context, enormous development has taken place within two other fields: i) procurement (supply-chain management) and ii) governance and anti-corruption policies. Both have gained tremendous momentum during the last decade, when the procurement process became increasingly recognized as a highly strategic function critical to a public or private sector entity’s performance. It is now clear that a proper identification and quantification of risks and the incorporation into a corporate risk management plan as an integrated part of the procurement process and the ongoing monitoring of risks when projects are initiated – including the recognition of new risks – are of extreme importance, with governance and corruption-related issues necessarily compounding the task.

The risk professional’s tool box is highly quantitative with volatility, standard deviation, Value-at-Risk, probability distributions, beta’s as indicators of market risk, correlation, diversification, mean-reversion as examples of important key factors. Often, the necessary risk analyses and functions are misunderstood, under appreciated and/or misapplied in the context of business management. There is now therefore the very critical need to translate the sometimes highly quantitative concepts for legal, procurement and finance professionals in order to align the risk management function effectively in an organization.

Challenges of ‘behavioural bias’ must also be addressed in businesses to ensure that the risk and finance functions are efficiently organized. Indicative is that in most organizations the Chief Risk Officer and Chief Financial Officer have either a ‘difficult’ working relationship or one in which the CRO is subordinated to the CFO.

In this two day Risk Management Intensive® the Caribbean Procurement Institute introduces a best-practice risk strategy for businesses which will address four critical aspects of the risk management function namely, financial risk, energy risk, procurement risk and governance/corruption-related risk and provide organizations with an understandable framework of how to structure their risk management. Different types of risk are analyzed differently (some risk events are repetitive, relatively smaller and better to forecast; others can be one-time events, hard to forecast but with huge impacts (like catastrophes), but at the macro-level it is possible to create a structured approach that is state-of-the-art, understandable and easy-to-incorporate in the entity’s strategic and operational processes.

Attention will not just be given to quantification and identification and the presentation of a ‘risk management template’, but the Intensive will also address issues related to when and how to accept risks and how to mitigate risks (e.g. through a risk allocation between client and supplier, or through a risk transfer to a specialized insurer, etc.).

The intensive will help participants to sharpen their appreciation of the definition and parameters of the risk and finance functions within organizations and a strategy for aligning it with other functions.

Integrating proper risk management is no longer the luxury of the organizations with the resources to source the most qualified talent or pay high consultancy fees; it is a must for corporate survival in today’s business environment.  

TOPICS INCLUDE 

• The Integration of Best-Practice Risk Management within a ‘State-of-the-Art’ Procurement Process: risk as a ‘cost’ factor within an evaluation process
• A closer look at the various types of risk (Risk Identification)

o   At the strategic level

o   Operationally

o   With special attention for Financial Risk, Energy Risk, Procurement Risk, Legal Risk, Governance, Corruption and Political Risk

o   Different risk mixes in different entities/industries

• How to structure the risk toolbox in such a way that the potential communication problems between ‘quant’-oriented risk managers and other decision takers in the entity can be avoided.
• How to optimally deal with risk in legal contracts? (Best-practice drafting)
• How to deal with serial – often a bit smaller / more manageable and predictable – risks? And how with one-time catastrophe or calamity risks which are far more difficult to predict?
• When is a risk small enough to ignore?
• The power of diversification:

o   Cross-sectionally (various potential risk factors at the same moment / time period)

o   Over time (to what extent will positive surprises in period A be able to offset disappointing results in period B?)

o   How to integrate diversification as a tool in my risk management process?

• Risk quantification: from uncertainty to risk
• Risk management is a process, not an ‘event’
• How to deal with risk?

o   Avoidance

o   Mitigation / Diversification / Risk Allocation

o   Risk Transfer / Sale (to a specialized party; i.e. (re-) insurer or derivative product)

• Know your risk profile
• The relationship between the Chief Financial Officer (CFO) and the Chief Risk Officer (CRO) and other professionals dealing with the risk function
• The ‘price’ of risk: when should I consider risk insurance?

o   Of-the-shelf, standard insurance products

o   Tailor-made, specialty insurance

• Monitoring risk:

o   How to learn from earlier experiences?

o   Identifying new risks when they occur

WHO SHOULD ATTEND?

·         For Procurement Professionals who understand that ‘best-value-for-money’, state-of-the-art procurement involves an integrated risk management focus.

·         For Energy sector professionals (both in the government and within the industry) who have to deal with the growing complexities and volatility in one of the most international, complex industries of our time.

·         For Finance Professionals who want to optimize their working relationship with Risk Professionals and/or better incorporate ‘risk factors’ in their strategic and operational finance plans.

·         For Risk Specialists at Insurance and Re-Insurance firms that want to better bridge the communication gap with the clients and potential clients, who often don’t even know when to opt for risk transfer strategies and/or with the idea to learn about new risk products based on interaction with the aforementioned professionals.

·         For Chief Executive Officers and Managing Directors interested in developing an effective risk management strategy and streamlining the legal, finance, procurement, and risk functions for corporate success.

·         For all other professionals with management and/or leadership responsibilities who want to upgrade their risk knowledge.

It should be noted that although this intensive is part of the Procurement Intensive Seminar Series – the approach to the Risk Management Intensive is not limited to its application to the procurement function but to a best practice framework and strategy for risk management across all corporate functions.  Modules based on the Global Association of Risk Professionals (GARP) programme and leading toward the GARP certification examinations in November 2009 will be incorporated and will be a pre-cursor to the GARP programme to be run by the Caribbean Procurement Institute in that month. The Caribbean Procurement Institute is an approved course provider of the Financial Risk Management and newly developed Energy Risk courses of the Global Association of Risk Professionals (GARP).