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How do you keep up with emerging financial risks?

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Financial risks are constantly evolving and challenging businesses to adapt and respond. Whether it is a global pandemic, a cyberattack, a regulatory change, or a market disruption, you need to be prepared and proactive to protect your financial performance and reputation. In this article, we will share some tips on how to keep up with emerging financial risks and manage them effectively.

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Stephen Amodu

Distribution | Technology | Strategy | Financial Services

1 Scan the horizon

One of the first steps to keep up with emerging financial risks is to scan the horizon for potential threats and opportunities. This means monitoring the external environment, such as the economic, political, social, technological, and environmental factors that could affect your business. You can use various sources of information, such as news, reports, surveys, podcasts, webinars, and expert opinions, to identify and analyze the trends and signals that could indicate a change in the risk landscape. You can also use tools, such as scenario planning, stress testing, and sensitivity analysis, to assess the impact and likelihood of different events and outcomes on your financial objectives and strategies.

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Stephen Amodu

Distribution | Technology | Strategy | Financial Services
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A major element to scanning the horizon is searching for nuances. What is the level and trend of government debt? What is the level and trend of interest rate? What is the level and trend of money supply? What is the debt profile of the government; - What currency, local or foreign currency? - What has these debts financed? Consumption or Investment? There is also the political angle of national government. How many years/months to election. The closer to election the higher the probability of government pursuing nice, not necessarily good policies. E.t.c The more important to searching for nuances is knowing the relationship between and among multiple nuances.

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2 Update your risk framework

Another step to keep up with emerging financial risks is to update your risk framework regularly. This means reviewing and revising your risk appetite, risk policies, risk governance, risk identification, risk assessment, risk mitigation, risk reporting, and risk culture. You need to ensure that your risk framework is aligned with your business strategy, reflects the current and future risk environment, and incorporates the best practices and standards in risk management. You also need to ensure that your risk framework is communicated and implemented across your organization, and that you have the appropriate resources, skills, and tools to manage the risks effectively.

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Stephen Amodu

Distribution | Technology | Strategy | Financial Services
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Risk Management frameworks, whether based on COSO or ISO are good are necessary at the initial and formative stage of a business, but not an efficient tool in managing day to day risk in present VUCA business environment. Frameworks set the tone of appetite, processes, stakeholders, responsibilities, governance, and exceptions, all Lines of Defence must collaborate and communicate to tackle emerging, day to day, and tail-wind risks.

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3 Engage your stakeholders

A third step to keep up with emerging financial risks is to engage your stakeholders frequently and transparently. This means involving your board, management, employees, customers, suppliers, regulators, investors, and other relevant parties in your risk management process. You need to solicit their input, feedback, and expectations on the risks that affect your business, and share your risk information, analysis, and actions with them. You also need to build trust and collaboration with your stakeholders, and leverage their expertise, insights, and networks to identify and address the emerging financial risks.

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Stephen Amodu

Distribution | Technology | Strategy | Financial Services
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This is one the less talked about but important practice in management, including management of risk. One of the ironies in management is that we leave key decisions that affect customers to the top hierarchy. We are aware, but often ignore that the closer decision maker/making is to the customer and team members who serve these customers directly, the smoother the customer experience and retention. The more we engage relevant stakeholders for their feedback and input, the better for the customer.

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SeongJin Kim

Head of Business Management Part, Samsung Foundry | Excelling in leading financial optimization and supporting growth strategies
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For a large company, it is relatively rare that financial risks come solely from financial activities. Investment, sales, and expense decisions are sometimes critical to assess potential financial risks. Make sure that they are well-informed about relevant financial information related to their activities. They need to understand the financial impact of their work. This is the first step to get feedback from them and prevent your uninformedness about potential financial leaks.

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4 Learn and innovate

A fourth step to keep up with emerging financial risks is to learn and innovate continuously. This means learning from your own and others' experiences, successes, and failures in managing the financial risks, and applying the lessons and best practices to improve your risk management capabilities. You also need to innovate and experiment with new ideas, methods, and technologies to enhance your risk management performance and resilience. You can use data analytics, artificial intelligence, blockchain, cloud computing, and other emerging technologies to automate, optimize, and transform your risk management processes and functions.

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Stephen Amodu

Distribution | Technology | Strategy | Financial Services
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"What brought you here will not take you there" - author unknown. The world is changing, and to be in business means continuous learning and improvement.

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5 Anticipate and adapt

A final step to keep up with emerging financial risks is to anticipate and adapt proactively and flexibly. This means anticipating the potential changes and opportunities in the risk environment, and preparing and planning for them in advance. You also need to adapt and adjust your risk management strategies and actions according to the changing circumstances and conditions, and respond quickly and effectively to the emerging financial risks. You can use agile, dynamic, and iterative approaches to manage the financial risks, and create a culture of risk awareness, readiness, and responsiveness in your organization.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you keep up with emerging financial risks?

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2

3

4

5

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1 Scan the horizon

2 Update your risk framework

3 Engage your stakeholders

4 Learn and innovate

5 Anticipate and adapt

6 Here’s what else to consider

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