This issue deals with strategic change in the face of an increasingly hostile, and expectant, environment. The new measure of good governance and risk management is now “Outcomes”. Our Regulatory Outlook column explains this new phenomenon now impacting the UK banking sector, but which is also, subtly taking a seat at the table in governance debates in political and commercial circles everywhere.
As with most regulation, these ideas are born of a realisation of a changing circumstance. In a world of ever faster, dynamic change, the very definition of what constitutes good due diligence is altering and, by extension, the very nature of leadership. In Governance we investigate the impact of this change on the way leaders exercise their power. We already know that shortage of time and the pace of business dictate the way organisations make decisions. Reliance on talented individuals using their instinct and intuition born of experience alone is becoming a risky venture. It may be that excellence in leadership cannot be taught, however leaders can and ought to be schooled in the use of their power and position, rendering unconscious brilliance into a conscious, strategic advantage.
As if to demonstrate the nature of this challenge and potential for conflict of styles, our Case Study boasts a fascinating, personal, view of BP’s incursion into Russia by way of TNK. This is a powerful story of culture, clash with lessons for all to savour.
The need for conscious leadership finds further expression in our Round Table debate on Corruption and the Individual, where the need to look beyond internal functioning and risk control, and to focus on the consequences of business conduct, emphasises the importance of setting values and priorities.
How then is the modern leader to master this daunting challenge? In our three remaining articles, we consider the changing nature of risk management and strategic diligence. Translating an “outcomes” mindset into risk management terms requires a greater consciousness and understanding of what constitutes broad-based risk. In Management Corner we focus on the greater risk environment and how it extends beyond known, controllable risk, and the need for the deliberate creation of a vibrant, organisational risk culture.
In Toolkit, we seek practical solutions to meet this significant challenge. Our authors look at one approach that attempts to bridge the gap between the need to measure risk, and the difficulty in ‘measuring the unmeasurable’. Navigating their way through the plethora of guidelines and regulations now governing risk management, they propose the creation of the “Flexible Organisation” as a way to provide a framework for a higher level of risk management and culture.
Risk; risk culture; strategic risk: Risk and strategy are - or should be - seen as synonymous. The Effective Practitioner looks at the beneficial impact of the conceptual marriage of the two, on both financial performance and holistic “outcomes”. We try to illustrate how a greater awareness of consequences by an enlightened and conscious leadership willing to make the necessary investments in information exchange, coordination and transparency, will result in superior financial performance over time.
Our business leaders need to pick up their courage and make the effort to address questions such as those listed on page 14 of this issue – perhaps some who find this too much might well find reason to resign their posts?
[1] http://www.bloomberg.com/news/2014-12-01/hsbc-s-flint-says-thomson-quit-amid-tougher-new-bank-rule.html