Conventional risk tools are no longer fit for 21st century businesses, according to Airmic’s chief executive, John Hurrell, who says that a new approach to risk mapping should be considered.
In an article published in the latest issue of Airmic News, Hurrell says: “Many of the biggest risks businesses face now are intangible and interconnected – such as reputational risk, cyber threats and supply chain vulnerability. The conventional tools, such as risk registers and traditional event and scenario-driven risk maps, used for understanding these risks are struggling to cope.”
As a result, Hurrell says that Airmic has been working with the Chartered Institute of Management Accountants (CIMA) on a new approach which links risk management to the business model.
Airmic and CIMA published a preliminary discussion paper in June ‘Looking through the Risk Lens’, which argues that companies should take a fresh approach to risk by explicitly linking a company’s risk vulnerabilities to its business model. It urges businesses and risk professionals to consider a new approach to risk whereby the four components of a business model – inputs, business activities, outputs and outcomes – are used as a basis for identifying the risks found in each layer of the business’s value creation process.
Airmic and CIMA are now seeking feedback from risk and business professionals on the discussion paper before developing the model further.
Hurrell states: “What Airmic and CIMA are proposing is a completely new way of thinking when it comes to risk at the board level. We don’t want to develop our ideas in isolation so we’re hoping for some honest feedback from our members.”