“Risk management is one half of risk. The other half of risk is risk exploitation, and it is more important than risk management.” ‘Risk management’ is a common term within the financial sector but is often considered a tick box exercise for prevention of revenue loss. Having been a risk strategist for over 20 years, do you consider this an accurate perception? And if not, why? “No, I don’t consider it an accurate perception at all. Firstly, risk management is one half of risk. The other half of risk is risk exploitation, and it is more important than risk management. “Risk exploitation is about growth, while risk management is about prevention of loss. The purpose of risk as an entity, which encompasses both risk exploitation and risk management operated dynamically, is to achieve your purpose as a business and this translates into making more money, profitability, sustainability and all the good benefits you can think of. “Unfortunately, many in the financial sector don’t know this about risk and that is why we continue to see losses such as the famous Silicon Valley Bank and others that have gone bust since 2022. The collapse of Signature Bank was one that really stood out to me because it was the only bank that did something right during the 2008 financial crisis, needing no government bailout but today, it’s gone. Risk gone wrong!” Do you think the value of risk has changed or increased in recent years as the global business sector has had to adapt to challenges like COVID-19, the cost-of-living crisis and rising inflation rates? “Yes, the value of risk has decreased, and the evidence is seen in the economy today. Most companies are spending-to-resolve. Opportunity management and benefits realisation management - the core components of risk - are no longer being practiced which leads to the failure of delivering what risk is supposed to. “I remember in my early years as a risk practitioner in the 2000’s, risk was all encompassing, and we operated all aspects of risk dynamically - threats, issues, opportunities, and benefits realisation. “Post 2008 financial crisis, the focus moved to the prevention of threats, which led to the focus on risk management and the almost death of risk exploitation, that is, opportunities and benefits management. “Although their intentions were well meaning, financial services regulators didn’t help this matter. They optimised the focus on risk management, leading companies in the sector to prioritise risk management to prevent bank failure with regulations like ICAAP –‘Internal Capital Adequacy Assessment Process’ [now ICARA – ‘Internal Capital Adequacy Risk Assessment Finance Monthly. Banking & Financial Services 53
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