Raise awareness of non-financial risk
PO 3 is linked to Paper 1, Governance, Risk and Ethics
In today’s economic climate, risk management is a concept that, for a host of reasons, is high on the priority of boardrooms in private and public organisations alike across the world. Risk takes many forms besides financial – operational, compliance, strategic, environmental, health and safety… the list is almost endless.
Accountants play an increasingly important role in helping organisations to identify and assess risk in different areas of their business. Their responsibilities may also extend to making confident, informed recommendations as to how much risk is acceptable to carry, as well as how to manage and control that risk and what steps to take should risk become a reality.
There is occasionally a fine balancing act to be achieved as professional accountants cannot be so risk-averse as to prevent reasonable operation or management of a business. To perform effectively, you need to:
- evaluate activities in your area and identify potential risks, the nature of the risks, the probability of occurrence and consequence
- communicate information on identified risks to relevant people to enable decisions and actions to be taken in terms of accepting or treating the risks
- maintain knowledge and understanding of legislative and regulatory requirements in your area of work
- consult with others when faced with complex risk issues to ensure that the right decision is made.
Risk awareness is a ‘must-have’ characteristic of professional accountants at all times. In order to achieve this performance objective, you will be expected to demonstrate that you can raise awareness of non-financial risk in a number of ways. These might include:
- helping to implement a regime and culture of sensible awareness of health and safety issues within your team or department (as opposed to ‘rules for rules’ sake’)
- considering what risks are posed to your team’s effectiveness in helping the organisation achieve its goals, should some or all members of the team fail to achieve their individual goals
- identifying who are the principle ‘owners’ of risk within your organisation, finding out how their role and yours impact on each other, and acting accordingly (including informing them of potentially risky practices or policies about which they might otherwise remain unaware)
- when working at clients or at external parties, ensuring you seek out, understand and comply with their own on-site risk management measures
- ensuring any new recruits or transferred colleagues understand the risk issues related to working in their new job or in your team
- volunteering to participate in any initiatives to stresstest business continuity or disaster recovery programmes.
The next step is to answer the challenge questions for this objective:
- What experience have you had in dealing with non-financial risk? (Think laterally – from simple forms you might have been required to complete for HR through to helping to set up safeguards against loss of data or intelligence.)
- Using an experience in your workplace, explain how you have ensured that the risk was correctly dealt with. (It doesn’t have to be a major risk – the important thing is: how you identified the risk, how you assessed its danger and what actions you took – including who you informed and what you recommended.)
- How did your organisation benefit from your actions? (This could be the avoidance of something as equally as a gain.)