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Meeting The Challenges Of ERM

With the establishment of the Institute of Risk Management’s (IRM) first UAE chapter, Carolyn Williams, IRM head of thought leadership, discusses the benefits enterprise risk management (ERM) can bring to the region.

Since its birth in 1986, the Institute of Risk Management has led the risk profession by delivering relevant and practical education and related life-long learning. Today we are the biggest provider of enterprise-wide risk education, not only in the UK but increasingly around the world. Although we are based in London, our outlook and team are truly international: the education faculty that oversees our exams includes members from several different countries, we have a growing number of regional groups, particularly in the GCC region, and even our IRM office team of 14 staff come from seven different countries spanning four continents.

It is notable that organisations in the Middle East are moving fast towards the adoption of international best practice in enterprise risk management. The oil sector was the earliest employer of risk professionals in the region, starting from concerns with health and safety and process risk management, and moving on into areas of financial risk associated with energy supply. Recruitment consultants in the UK have noted that the energy sector is a significant source of new employment for skilled financial risk experts being made redundant from the banking crisis. Parts of the Middle East, Dubai, Qatar and Abu Dhabi in particular, have sought to diversify their economies away from oil and have established themselves as local centres for finance, tourism and other forms of trade. Financial regulation is being brought into line with international best practice, which includes a focus on the risk management capability of the financial firm. The DIFC and the QFCRA, to give just two examples, are both implementing risk management frameworks within their organisations. Banks and insurance companies are looking to the Basel II requirements in determining their risk management frameworks.

The construction sector has also been keen to adopt risk management techniques to maximise effective project management alongside the control of environmental impact, the availability of human resources and the ups and downs of the economy.

Awareness of broader risk issues, and the interrelationships between them, is also rising across the region. Reputation risk was brought into focus last year when the BBC’s Panorama documentary, shown in the UK, claimed that conditions in labour camps run by one of the large construction companies in UAE were sub-standard. The company strongly rejected these allegations which were nevertheless investigated by the UAE Ministry of Labour. Whatever the truth may be in this particular situation, it marks an increasing expectation of transparency of operations and recognition that risks to reputation (whether justified or not) must be understood and properly managed.

Not surprisingly, we have observed a widespread hunger to learn more about the tools and techniques of enterprise risk management, and how to embed it within an organisation. The Middle East has in recent years been the fastest-growing area internationally for membership of the Institute of Risk Management and provides the largest single group of students and members outside the UK and Ireland, with a mixture of expatriates and locals taking risk management qualifications or joining in professional development activities. Our regional members group started with a single group in Dubai, but has now expanded to a thriving Middle East Network, thanks to the energetic facilitation of James Portelli, fellow of the IRM and head of risk at the Oman Insurance Company. The network now contains active groups in the UAE and Qatar and emerging groups in Bahrain and Saudi Arabia.

Commitment on behalf of both employers and national agencies to raising levels of skills of all types through education and training has resulted in a high level of interest in risk management courses. Providers such as the Gulf Insurance Institute (GII) have started up to meet local training needs. There is also a demand for distance learning which can take place in the student’s own time and in their own home, the IRM’s International Certificate and International Diploma have been designed with this in mind.

The Institute has recently made all course material available over the internet with final examinations taken in person either at the institute’s regular exam centre in Dubai or at special centres which can be set up elsewhere in the region in response to demand.

As well as providing qualifications, the IRM also provides information and ongoing professional development opportunities for its members and for all those interested in risk management. The latest example of this is a guide to the effective implementation of the new ISO31000 Risk Management Principles and Guidelines which is available for free download from the IRM website. The IRM also has a simple risk management standard suitable for firms of all sizes, which is also available for download in 15 languages, including Arabic. Members of the IRM, wherever they are in the world, can also access the institute’s online resource centre which gives them access to a database of risk management articles and web resources.

The benefits of an effectively implemented ERM programme are great, ranging from reduction in losses to significant strategic advantage. The challenges to such a programme in the current climate are also considerable. The first step is to ensure that those within an organisation charged with these responsibilities are properly trained and qualified and that they have access to a strong professional network to keep them abreast of the latest thinking on the subject of risk.

The author of this article, Carolyn Williams MA ACII MIRM, is the head of thought leadership at the Institute of Risk Management. For more information see www.theirm.org.