Integrating the Output from Risk Workshops into the Business Planning Process

Presented by:

Eneni Oduwole

Group Head, Operational Risk Mgt.

Guaranty Trust Bank Plc

Outline

• Strategic Planning

• Risk Management (RM) Output

• Planning for Superior Delivery

• RM Enablers

• RM Areas of Focus / Communication Improvement

• Strategy & Risk Interplay

• RM & Value Creation

• RM & Strategic Planning

• Failure to Incorporate RM

Is it,

Risk Management or

Strategy Planning?

Which comes first,

the Chicken or

the Egg?

Introduction

Overview

• Strategic planning requires clarifying the overallpurpose and desired results of an organization,and how those results will be achieved

• It is a disciplined effort to produce fundamentaldecisions and actions that shape and guide whatan organization is, what it does, and why it doesit, with a focus on the future

Case Study

• Its 2008, CSBank Ltd is about to review its strategicplan; a few months ago, it concluded its Risk & ControlSelf Assessment

• Is there any need to refer to the output of its RiskAssessment?

• What should be the drivers of its strategic planning?

• What areas of its business require focus to achieve itsgrowth plan and desired first mover advantage with newbusiness opportunities?

• Risk Register / Log

• identification of prevalent risks

• prioritized list of risks

• impacts identified

• Residual risks

• Risk Appetite & Tolerance Levels

Risk Management Process- Output

Desired business model, organizational

structures and business strategies

Contents of a Risk Register

• Risk description

• Risk owner

• Risk Category

• Cause of the Risk

• Impact of the Risk

• Probability / Frequency ofoccurrence

• Risk Rating

• Proposed responses

Approved final response

Contingency / Action plan

Fallback plan

Cost of mitigation/fallback plans

Time required for risk responses

Current status of the risk

Planning for Excellent / Superior Service Delivery

• Develop Customer Service Policy

• Build customer loyalty

• Create a positive environment

• Establish an image of quality & professionalism

• Ensure prompt & effective customer complaints mgt

• Ensure management awareness of key criticisms

• Going the extra mile; beat competition

• Develop customized services

• Maintain customer feedback vehicle

• Train all staff on service delivery and products

Risk Management Enablers

• Develop Customer Service Policy– Risk Governance

• Build customer loyalty– Track business volumes and demographics of customers (reward

systems, promotions, special events)

• Create a positive environment

– Risk Assessments

• Establish an image of quality & professionalism– Track customer, agencies and regulators’ ratings

• Prompt and effective customer complaints management – Track no. of customer complaints logged, treated and outstanding

Risk Management Enablers(cont’d)

• Management awareness of key criticisms – Risk Reporting

• Going the extra mile; beat competition – Peer group analysis / Risk Reporting

• Develop customized services – Review of customer behaviour / Trend Analysis

• Maintain customer feedback vehicle – Track number of feedback, areas of business commended and areas

not mentioned at all

• Training on service delivery and products – Track number of staff trained on service delivery, product offering &

number of complaints against staff attitude and product knowledge

RM Areas of Focus’

The Economist

Risk Communication Improvement

The Economist

Strategy/Risk Interplay

Strategy

RM

Objectives Assure Value-Creation Enhance Value Value 1 Create new opportunities

Invest in new business activities that promise gainful returns; expected to exceed capital cost

Create new opportunities Opportunity/threat identification / mitigation in new activities, price deals to compensate for such risks

Value 2 Improve performance Increase returns on existing business with better tech, processes, policies, knowledge etc.

Improve performance Measure loss exposure on cash flows. Risk/Reward, aggregated capital, scenario analyses, opportunity costs

Value 3 Harvest existing value Evaluate, exit non-profitable business

Harvest existing value Market analysis, risk mapping, risk adjusted performance measurement

Value 4 Align risk-taking with risk appetite Assurance that company is not gambling its future; avoid risk averse behaviour or excessive competitiveness

Align risk-taking with risk appetite Discipline, focus & control, only take risks equipped to handle, capital adequacy

Risk Management and ValueCreation

Effective ERM

Increase predictabilityof earnings & control

downside risk

Decrease leakages and Loss build-up

Enable more risk taking which

increases earningsupside

Increase value of

company

RM & Strategic Planning

• Evaluate risk profile of strategic decisions for a morerobust business strategy

• Ensure that the policies, procedures, measures andmonitoring are established and continuously improved

• Provide periodic updates / reports to the Board andManagement on identified risks, achieved targets /returns and residuals risks

Failure To Incorporate RM

• Informal / reactive evaluation leading to eitherconservative or exaggerated growth scenarios indeveloping strategic plans

• Subjective reasoning feeds the process

• Little or no risk adjustment mechanism

• Inability to maximize potential for creating sustainablecompetitive advantage

TO CREATE VALUE

ALWAYS CONSIDER

RISK STRATEGY

Conclusion

“For firms to succeed in this increasingly global and competitive marketplace,

risk management must become a state of mind.

A systematic and proactive enterprise-wide approach to managing risks is essential to

making risk management

an integral part of the company’s DNA”

ANURAG SAKSENA

– Chief Enterprise Risk Officer, Freddie Mac

Thank you...