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The reality of risk

Managing risk can be a tough nut to crack, no matter what business you’re in. A panel discussion in Los Angeles, led by the Finance and Management Faculty’s Rick Payne, brought together leading business minds, who set out some ideas for dealing with risk.

Effective risk management is hard to achieve. However, some practical ideas emerged recently during a panel discussion at the American Accounting Association, Management Accounting Section Conference in Los Angeles. I chaired the panel, which comprised Professors Chris Ittner (Wharton University of Pennsylvania), Bob Kaplan (Harvard Business School) and Margaret Woods (Aston Business School) together with Ian Eddleston, partner at EY and James Dibbo, CFO of PF Chang’s.

Risk ownership matters

CFOs often have overall responsibility for risk in organisations. However, as Ittner highlighted, based on survey evidence, this can result in a narrow focus on compliance and financial risks, such as credit and liquidity. The over emphasis on compliance risks was something all panellists had observed, maybe because they are non-negotiable and relatively easy to manager. Ittner also raised concerns that many CFOs are not driving cross-functional working on risk, a pre-requisite of Enterprise Risk Management, which aims to bring together risks in a holistic and integrated way.

This is an extract from the Finance & Management Magazine, Issue 234, July/August 2015.

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