Risk Management Software - Simon Gallagher, Moore Stephens

Companies that approach risk management from a purely compliance point of view are missing the point about its value to business, Simon Gallagher of Moore Stephens tells Nigel Ash.

While the risks confronting any type of business may have changed little over time, the manner in which these risks are managed most certainly has. In the financial services and insurance industries in particular, a rising tide of regulation imposes the extra risk that companies fail on compliance and so face penalties and censure.

Yet deploying advanced risk management solutions purely to cope with this increased regulatory environment is short-sighted, says Simon Gallagher, insurance partner at Moore Stephens. Proper risk management should not be a quick and easy fix to compliance challenges.

Gallagher highlights recent research suggesting many companies still do not view risk management strategically. "By implication, they are doing it for the wrong reasons; they are looking at the compliance push rather than the business pull case," he says.

RISK MANAGEMENT MEANS A CULTURAL SHIFT

"The context of risk management has to be business-facing," explains Gallagher. "It has to be a strategic initiative that affects the whole business. This is its true value proposition. Risk management is never a cost; it's an investment."

In Gallagher's view, those who think otherwise are completely misunderstanding the whole concept of risk management. "The fact is that it is a state of mind. It is a cultural issue. You cannot just wish it into being. You have to do a lot of work. You are changing the way people in a company behave."

Just how much work, over a period of one or two years, rather than the expected one or two months can, Gallagher admits, initially shock clients. However, he explains that to do the job successfully, an entire organisation has to buy into the process. It is no use creating, for instance, a risk management subset for disaster recovery, if the resulting plans sit un-owned and in isolation in a box on the side of the organisation. As and when disaster strikes, the business may be hard pressed to recover the plans, let alone itself.

INTELLIGENT RISK MANAGEMENT

To help clients create successful organisation-wide risk management, Moore Stephens Consulting, working with programming company, Methodware, has produced its 'bIntelligent' solution, which comes already populated with key risk measurement parameters. Once a core risk register has been created, bIntelligent acts as a powerful multi-user database, which demonstrates what has been done to mitigate risks and precisely who is responsible for their management.

"Unlike complex risk management software, bIntelligent is a very straightforward tool, which facilitates the proper introduction of risk management," says Gallagher, "One of its features is its ability to record lots of information about the business in a way that can be shared across different business units and within the different hierarchies in the organisation. It also provides a transparent and auditable trail on thoughts and issues on risk."

THE RIGHT RISK TOOLS

Moore Stephens has over a century's insurance experience with very strong statistical skills and forecasting scenario analysis, tools which are essential to fix claim reserves, product pricing models and reinsurance arrangements. It works with some of the biggest and smallest names in all facets of the industry, and has developed solutions for captives, Lloyd's syndicates, re-insurers, brokers and global general insurers. The firm therefore understands the market and the environment in which it operates.

It now combines this knowledge with its powerful risk management tools. As a result, says Gallagher, "We are helping to build the business case for, and communicate some of the concepts of, what risk management actually means. Companies can then start to think about the benefits that can yield from a business, rather than a compliance, point of view."