Fundamentals of Risk Management

Alternative 
approaches
Changing face of risk management
As with any management initiative that becomes embedded within the way the
organization operates, a successful risk initiative is bound to develop and become 
more sophisticated. Developments in the discipline of risk management, especially 
during the past 10 years, have been dramatic. Also, the level to which risk manage-
ment requirements have become embedded within corporate governance has been 
extensive.
Many new developments of risk management have appeared during that time.
In the 1990s, risk management practitioners used to talk about integrated or holistic 
risk management, but now the universally accepted terminology for the broad
application of risk management across the whole organization is enterprise risk 
management (ERM). Similarly, operational risk management (ORM) has been
established and developed very substantially during a shorter time period of perhaps
five years.
In many ways, the fact that the risk management discipline continues to develop 
and adapt itself to changing circumstances can be seen as beneficial. However,
there is a danger that risk management practitioners will be seen to be delivering an 
ever-changing and therefore inconsistent message.
That is not to say that risk management should become a static discipline, but
it is important to remember that changing the basis on which risk management 
analysis and advice is offered and appearing to be changing the very nature of
the risk management process, will cause confusion and lack of interest amongst
the senior board members.
Any review of the changing face of risk management has to acknowledge the
global financial crisis and the role that risk management played in the development 
of this situation. As the global financial crisis developed, newspaper and television 
reports constantly repeated two messages: ‘risk is bad’ and ‘risk management has 
failed’. Neither of these statements is true. It is essential that organizations take
appropriate risks, and the failures that led to the global financial crisis were failures 
in the application of risk management, not failures of risk management itself.