Useless Risk Management Edifices that Organisations Build

Norman Marks in his blog post called "Time to wake up to risk reality" said that "This is a post about news we should have known for a long time.
It’s time to recognize the truth about risk management." 

Hans Læssøe commented that: "I guess too many companies have a risk management function only for the sake of being able to say, that they have it – and to produce reports that shows “we are doing well”. Executives had (and have) no intention of letting risk people involve themselves or tamper with decisions they are making or how they execute/operate."

Roger responded as below.


Your first paragraph (3 April) makes an astute observation. The essentially useless ‘risk management’ edifices that organisations build, play no meaningful role in assisting the daily task of making sound decisions – from top to bottom. (I put ‘risk management’ in inverted commas, incidentally, because although the expression is common, there is little that is common across all its users as to what it means or consists of!)

These edifices are established at great cost and inconvenience either because of regulatory pressures as illustrated by John Fraser’s later anecdote (such regulations are often a forlorn hope by governments that this will somehow avoid society being disadvantaged in some way or other) or because of supply chain obligations which, as with Covid-19, spread up and down the chain with ease, or because of virtue signalling by the new breed of woke directors who are not focused on their real job of adding shareholder value.

The fact is, as you say, these ‘risk management’ edifices exist as an externality to the real management activity (including strategy setting) that is providing the engine room for the organisation.

This is why ‘risk management’ has little influence or, worse still, why it has an adverse effect which is the more common consequence as a consequence of its distractive effect and resource wastage. At very least, it’s not seen as helpful to the daily challenge of making sound decisions because as the world has shown, repeatedly, that with or without ‘risk management’ it is perfectly possible to make both good decisions and bad decisions.

One doesn’t have to invert normality in order to make good decisions – just become a little more skilled in the steps that are already followed. There is no need for a ‘system’ or ‘framework’ (for which, read ‘edifice’) just decision-making skill.