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BRUSSELS, Belgium-Globalization, technological advances and an increasingly geographically remote workforce are combining to accelerate the rate of change in the risk management profession.
Speakers and delegates at the 27th International Insurance & Risk Management Conference last month, organized by Management Centre Europe, agreed that risk management techniques are central to an organization's success.
Unfortunately, many companies still do not have a comprehensive approach to risk management, said Jozef de Mey, chief executive officer of AG 1824, a unit of Brussels, Belgium-based insurer Fortis Group.
"Every day, there is a need for effective risk management," said Mr. de Mey, but organizations seldom put it high on the agenda until they have experienced a loss, and then "companies often forget the lessons they should have learned," he said.
Instead, organizations should open their eyes and recognize that risk management is key to the whole management process," he said.
Risk managers often find themselves under growing pressures due to corporate restructurings, which can lead to a "loss of experience and know-how," especially given the trend toward outsourcing. They must push the "degree of risk awareness (in the organization) to a much higher level." The CEO is the first risk manager, said Mr. de Mey, and "it is important that everybody is aware of their role in the risk management process."
Providing shareholder value is the force driving the current development of integrated risk management programs, he said. Nevertheless, he reassured delegates that "the basic rules will remain the same" and risk managers will continue in their primary role of protecting the safety and assets of their organizations.
Changes in organizational structure also are affecting risk managers. As organizations become increasingly global, day-to-day operations overseas frequently are handled by local risk management staff who report to the home office. Mishandling these relationships can lead to risk management problems, according to Kevan Hall, managing director of Global Integration Ltd., a U.K. cross-cultural training and consulting organization. He warned delegates of three core dilemmas when managing "remote" workforces:
The problem of creating a sense of identity and team spirit.
The challenge of managing work activity, getting tasks done at remote sites.
Integrating and finding a balance between global and local operations and goals.
In addition to these dilemmas, there are four management barriers to be overcome, Mr. Hall said. These include distance, national and corporate cultures, time zones, and managers' time and technology.
Advances in technology have led to a shift toward non-traditional working patterns such as telecommuting, Mr. Hall noted. At the same time, the number of regional and global organizations is growing, head offices are shrinking, and there are fewer middle managers in organizations. Mr. Hall wryly pointed out that this may not be the way forward for all organizations, as recently he has identified the start of a new trend of relayering in organizations.
Nevertheless, he said, it does bring into sharp relief the question of whether to implement a high degree of control over remote sites or grant them a degree of autonomy. Both have advantages, according to Mr. Hall. Control is good for certainty, accountability and consistency, while autonomy breeds flexibility, fun, motivation and responsiveness.
Different types of businesses will have different attitudes about what constitutes a good balance. For example, while initially it may appear that a control philosophy would be preferable for manufacturers, in fact he said that "very often you find that in areas such as manufacturing if you use autonomous teams, then you have higher quality levels" because the teams are benefiting from the "fun" factor.
And hierarchical control often is reduced substantially in international organizations because the senior manager is not physically present much of the time. Because control systems in organizations are "very largely a tax on trust," the more individuals form trusting relationships, the lower the need for formal control, said Mr. Hall.
Mr. Hall offered other tips for remote management:
Establish regular two way communication.
Use a coaching approach.
Define clear shared objectives and milestones.
Take advantage of diversity.
Take time to learn from your experiences.
Build common visions and values.