A new publication by the Risk Coalition (a group of organizations in the UK that includes their Institute of Directors, a couple of risk management associations, and the organizations for internal and external auditors) merits our attention.
Raising the Bar: Principles-based guidance for board risk committees and risk functions in the UK Financial Services Sector has some interesting content. For example, it says:
- In financial services the real risk is to take no risks. We are in the business of managing financial risks.
- While the concept of the Three Lines of Defence continues to provoke much academic and professional debate, the Risk Coalition believes the basic principle of requiring independent oversight and challenge of management risk-taking remains sound.
In addition, I like that the guidance talks about ‘risk taking’ instead of simply managing risk. It also defines risk as not purely a negative effect on objectives:
The possibility that events will occur that affect the likely achievement of an organisation’s corporate strategy or strategic objectives. Commonly considered as negative events (downside risk), there may be occasions where risks may be exploited to an organisation’s advantage (upside risk).
Its definition of risk culture is also useful:
The combination of an organisation’s…
