What about risk Management?

Risk management is a topic that might seem very costly and very complex to some of us. Actually, managing risk is something most of us do. You just need to manage it sensibly. Risk Management is a guide.

How did I see Risk Management evolve?

As I spent 20 years in the Financial Services Industries, I witnessed the evolution of risk management techniques. As we worked, risk management moved from a part of the business itself to very specific team that look at it in a centralized and systematic way. As young comptroller, the frequency and size of risk events were monitored by operational groups. When asked about risks, the manager in charge could size and identify them on the basis of the regular and systematic review of all the data reports that were produced. As time did go by, this proved to be insufficient. We had to approach the issue statistically before moving it specific risk groups. They became much more active and, not only did they build the reporting tools to correctly follow cases up, but they also were much more demanding before accepting a new risk of any kind. At the same time, all teams became much more risk aware but also spent much more time on risk issues. Before I knew it, I was the CFO of a bank, and I received risk reports covering all aspects of the risk the bank was running with trends, root causes analysis of key issues, follow up on corrective actions and analysis of potential new opportunities. As manager, I could focus on the main risk items, but this improvement came with a substantial cost.

Why these articles?

I wrote these short papers to give a sense of risk management to people who do not practice it day-in, day-out. I genuinely believe that using these concepts in day-to-day management can benefit any company. However, if you are a risk specialist, you might find my prose too light compared to what you are familiar with.

Does risk Management need to be costly?

Does this sound positive? Well, most of the people I meet claim this new context is either business or creation restrictive as people spend more time commenting on risks than acting.  That can be true if no correct organization of risk is set up, and no technology exists to back the exercise up. The story I told in the previous section goes with a context that evolved, through time, from a small entity to a sizeable one, and from a spreadsheet to automated production of statistics. It ends nowadays, in a company that has grown 40-fold, has operations around the world and support this process with a much better technology.

What should be taken away from this story?

  • Risk Management is something that most of us do intuitively. Doing it more systematically is therefore not such a big deal. It mostly completes the picture with opportunities.
  • Risk Management is something that needs to fit your organization. Everybody needs to manage uncertainty in its own way, but it needs to manage it.
  • Risk management is like lines marking the limits of the road. The lines tell you where the road is. They do not tell you that you may not take an alternative route. Creativity is not restrained, it is guided.

As I started to appreciate these three points, I decided to write a set of articles giving a high level overview of risk management. I just invite you on this interesting journey and hope you can make the best of it.

JC Mathonet

Jean-Christophe Mathonet

Jean-Christophe Mathonet

Co-Founder & Partner

My positions allowed me to cover a wide range of functions: general management of entities, corporate taxes, supervision of IT and operations, accounting, budgeting, creation and restructuring of legal structures, regulatory reporting, acquisition of companies, operational statistics, and management accounting.

Specialties: Finance as a general matter