Fundamentals of Risk Management

Scope of risk management
55
FIgURE 
4.2
Risk management sophistication
REFORM
Hazard
management
• Tolerate
• Inhibit
• Failure
• Mitigate
Fearful of
requirements
CONFORM
Control
management
• Accept
• Doubt
• Uncertainty
• Manage
Auditing of
compliance
PERFORM
Opportunity
management
• Invest
• Enhance
• Success
• Embrace 
Achievement of
benefits
Contribution
Sophistication
INFORM
Compliance
management
• Avoid 
• Undermine 
• Illegal 
• Minimize 
Unaware of
obligations 

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Introduction to risk management 
56
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unaware of obligations – INFORM;
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awareness of non-compliance – REFORM;
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actions to ensure compliance – CONFORM;
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achieve business opportunities – PERFORM;
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inactivity caused by obsession – DEFORM.
Most countries in the world have a wide range of voluntary organizations and char-
ities. It is understandable and quite appropriate that the directors or trustees of these 
organizations should have a high level of concern and awareness in regard to risk 
management. However, it is often reported that trustees are more concerned with 
risk management and correct governance than with raising funds for the charity that 
they support. Allowing this concern with risk management to paralyse the activities 
of the organization would be to the detriment of the good causes that the charities 
are supporting.
As the level of sophistication increases and risk management professionals become 
aware of the alternative approaches to risk management, they should value the con-
tribution that can be made by other approaches. The development in risk management 
approach can be summarized as follows:
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Compliance management must not be undertaken in a fragmented manner, 
even if excellent standards of compliance are achieved.
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Hazard management specialists may find that there has been a trend towards 
a desire to retain more insurable risks (and buy less insurance) as a result of
a more holistic approach to risk management.
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Control management specialists must not squeeze entrepreneurial spirit and 
effort out of the organization.
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Strategic planners must recognize that risk management tools and techniques 
can contribute to better strategic decisions and the successful exploitation of 
business opportunities.
The approach to increasing risk management sophistication described in this section 
is also considered in Chapter 24 by the use of the 4Ns. An alternative approach to 
increasing levels of risk management sophistication or risk management maturity is 
the fragmented, organized, influential, leading (FOIL) approach that is also consid-
ered in more detail in Chapter 24.

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