It may seem that the words Risk Committee and JP Morgan have been in the news every week over the past few months. The big issue is that no one truly understands the role a Risk Committee is supposed to play. Rather than hearing of the benefits of having a Risk Committee, the only time people hear about it is when they [Risk Committee] fail to do their job. The failure of JP Morgan’s Risk Committee to do their job properly led to their $5.8 BILLION loss.
While Risk Committee itself is not a new concept, the term has been on the tip of everyone’s tongue over the past few years and was even included in the Dodd-Frank Legislation in 2009. The benefit of having a Risk Committee is it gives company’s senior management greater transparency and better ways to evaluate and mitigate risks.
Currently, The ALS Group is helping to form such a committee for one of our clients. The impetus that led to this project was our client wanting to make sure they were aligned with the international standards that define risk (ISO 31000). The Risk Committee would establish credibility for the actions and steps in their Risk Management process; it would provide guidance for the organization as it relates to its strategic goals and create a way to track the company’s risk on a macro level.
The ALS Group is working as a facilitator on this project and, we believe that in order for the Risk Committee to become a pivotal part of any organization, it must adopt a Risk Register that will not only track a risk, but also evaluate the effectiveness and cost of any mitigation strategies that exist within the organization. This provides a materiality to any one risk which ties it to the impact such risk can have on a company’s bottom line.
If you would like to learn more about the measures you can take to either create a Risk Committee or to better understand your company’s risks please contact Albert Sica at 732-395-4251 or at [email protected].
