The term "Risk Management" was re-defined in the USA in the mid fifties and used to drive constructive change in management behaviour.  It fell in to disuse in the sixties and seventies and was largely kept alive by the insurance industry.  The last ten years have seen the resurgence of the concept of risk management.  In the future the cry for risk management will only get bigger, both in the private and public sectors.  Why is this so?

I believe risk identification and management are becoming increasingly important because of the need for Directors and Officers to comply with legislation, this requirement to comply is an increasing phenomenon both here and overseas with large penalties applied for non-compliance.

What are the benefits of risk management to a company?  It is only when benefits can be demonstrated effectively that cultural change can happen, punitive measures result in cosmetic compliance not cultural compliance.  Effective risk management results in cultural change and a significant shift in the way business is done.

Risk management works if companies can set clear objectives, it is important that they are expressed around the future and not the past or indeed even the present.   Directors and officers need to continually ask themselves whether the objectives as set will meet the needs for the future to at least an horizon of two to three years.  If this is done effectively then the application of risk management becomes an essential tool for reducing the probability that corporate objectives will be jeopardised by unforeseen events.

An attitudinal shift is important for directors and officers, they must realise the future is here now; they must embrace risk management and not see it as someone else's problem within the structure of the company.  A company that focuses only on internal financial controls is doomed to failure under the emerging paradigm of corporate governance.

The only way to achieve the positive implementation of integrated risk management is to ensure we do not slide down the path of negative compliance, rather we must move forward with the application of positive and directed due diligence.  This is done by education and understanding that implementation comes with knowledge and experience. 

The Australian Institute of Risk Management together with Australasian Risk Management Unit, Monash University has launched this unique CPRM conversion course to recognize professionals in a growing area of business management.  This will allow the development and expansion of the skills that will be needed to survive the increasing uncertainty that is faced in an increasingly competitive world. The risk manager of the future will facilitate the knowledge needs of directors and officers of companies and government entities.