It has been my experience that risk monitoring activities undertaken by compliance, internal audit or risk departments, collectively referred to as “risk departments”, and the individuals undertaking such activities, are not usually given sufficient weight or authority to ensure that risks are being properly mitigated. This may result from a false perception that no business value is obtained from risk monitoring reports. There are a number of asset management companies that have adequate risk system, and business controls. They also have risk systems that produce key risk indicators and other risk information.
I find the compliance puzzle is often missing several pieces. One is the link between risk information and risk monitoring. Its absence can result in over-monitoring, at best, or under-monitoring of critical risks, at worst. Another piece often missing is the personnel for quality monitoring. Contractors can provide an excellent short-term solution.
Purpose of Compliance Monitoring Procedures
The purpose of a structured approach to compliance monitoring is to ensure that the standard of monitoring is consistent across all areas of the business and that all risk areas are covered. Regulators expect risk monitoring to be undertaken using a risk-based approach. The question is whether compliance departments actually understand the business processes and therefore what the risks are. A full understanding of the business process is essential to gain the support of line management and to be able to carry out appropriate risk reviews.
The results of risk monitoring activities are generally provided to line management in an initial report, with an agreed final report provided to line and senior management. The report must be accurate and add value, rather than a document for the purpose of individual criticism. Appropriate buy in is needed from all areas of the business to ensure that compliance monitoring is viewed as a tool that assists day to day operations.
Risks within each business process
The next task is to identify the risks within the business processes that should be subjected to independent monitoring. These risks should be recorded in a Business Review Planning Memorandum and should be discussed with line management as part of the review planning process. The risks identified can again be classified as structural, regulatory, operational, people and financial.
The report should be clearly identified as a draft subject to discuss with line management and should not be provided to the final distribution list until all matters have been agreed as valid findings. In the event that a finding cannot be agreed between compliance and line management, this point should be escalated for senior management to agree upon an outcome. In the absence of such agreement, this point should be escalated to the CEO for final resolution.
Contractors: Fill the Gaps and Upskill Permanent Staff
Contractors typically provide companies with access to skills they do not ordinarily have, or do not have enough of. Companies can therefore take on expertise and skills as and when they need them.
To have this experience and expertise permanently available in-house requires significant investment in time and money and a much larger team than would be possible for most companies.
Engaging good contractors can improve the skills and approach of permanent employees by promoting best practice, offering mentoring potential and encouraging expertise sharing. Good contractors can bring new ideas, greater expertise and broader experience to organisations, enabling their existing employees to learn and think differently.
There is a clearly identifiable value to be added by an effective risk management process and by having efficient risk monitoring resources. A risk monitoring process, if well thought-out and executed, will help line management operate their business processes more efficiently.
At Broadgate Search, we have found that simple solutions to peaks in pressures, such as bringing in experienced contractors with the right skills, knowledge and business cultural empathy will help add body and growth to a company. The contractors can also upskill the permanent team for the long term so their input as contractors can be of lasting value to any company.
Broadgate Search have the solutions.