Baring Asset Management Limited 155 Bishopsgate, London EC2M 3XY Authorised and regulated by the Financial Services Authority Tel: +44 (0)20-7628 6000 Fax: +44 (0)20-7638 7928 www.barings.com Challenges and Opportunities of Enterprise Risk Management SII Risk Forum 9th October 2007 Christopher Forster Disclaimer This presentation and the content of these slides are the views and opinions of the presenter and are not necessarily the views or opinions of Baring Asset Management Limited. Challenges and Opportunities Opportunity should be seen as the flip side of Challenge Risk is a relatively new discipline – we are all finding our feet Risk Regulation is quite new and still developing Market Practice is evolving Emergence of new IT solutions in the market place Vital Components Senior Management Commitment and Sponsorship Cultural ‘buy-in’ by staff across the organisation ‘Value Added’ output Challenges Senior Management Support – they will focus on: Cost? Time? Value Added? Challenges Cultural Buy In Surely this is just Audit by another name? Why should we ‘really’ help Risk – they will only make more work for us? How can we help them anyway? Opportunities Risk is here to stay – regulators, management and clients all have risk on their radar screens UK is moving towards Principles Based Regulation – it is now down to us all to get it right – we can make market practice Risk techniques and practices are not yet so embedded that we can’t change the shape of our future There is plenty of data around– but where’s the information though? Value Added Benefits Better understand and measure our risks and controls Improve our ability to scenario plan Enable us to reduce or control our regulatory risk capital Help allocate capital throughout our businesses Aim to make Risk a profit centre How Do We Do It? Central unit or embedded in the business line? What about Complex/International groups – will there be greater convergence or more specialisms emerging? Who does it – what is a risk professional? How do we distinguish ourselves from other ‘control’ functions? What do we monitor and how do we gather our information? How can we best use IT tools? Granular/detailed approach or high level/mission critical focus? How do we measure and quantify risks? What do we report, to whom and how? What Next? Regulation will continue to evolve Regulators and management will become more demanding The ICAAP and SREP process will establish benchmarks, better define requirements and market practice SYSC will be tested and challenged Liquidity risk will move up the radar screen Technology will play a much greater part Companies Act 2006 The End Or rather, just the end of the beginning?