INTEGRATING RISK MANAGEMENT AND BUSINESS CONTINUITY

Transcription

1 INTEGRATING RISK MANAGEMENT AND BUSINESS CONTINUITY June 2012 Sami Ahmed Assistant Vice President - MRC Paolo De Rosa Senior Vice President - MRC

2 Introduction Purpose Raise your knowledge and awareness of the reasons and processes to integrate Business Continuity Management (BCM) with Risk Identification and Assessment into an effective Enterprise Risk Management (ERM) Framework. Scope Background Method of integration Advantages of integration Governance structure Summary 1

3 Background What is a risk? Effect of uncertainty on achieving objectives The chance of something happening that will have an impact on objectives Is measured in terms of a combination of the likelihood of an event occurring and their consequences How do you control risk? Eliminate risk Avoid risk Transfer risk Retain risk Change the activity, cease it all together to eliminate the risk Change the activity to reduce the likelihood and/or consequence of the resulting from the risk Transfer the risk via contract, insurance or other means Accept that the risk is intrinsic to activity implement level of controls based upon risk appetite Increased exposure 08 June

4 Background Business Continuity Management Exercise and Audit Understand the Organization Develop Business Continuity Plan Determine BCM strategy (BIA) 3

5 Background Business Continuity Management Process BCM Process Functions Filter Threats Plans Recovery of Business from Interruptions 4

6 Background What is Enterprise Risk Management? Enterprise risk management (ERM) is a structured, consistent and continuous way of managing risk. Allows companies to better understand and address the material risks ERM adds value by: Reducing risk Increasing potential opportunities Reduce overall uncertainty 5

7 Background Enterprise Risk Management ISO 31000:2009 6

8 Background Principals The values of risk management practices within the organisation Define the purpose How ERM should look and feel Ensure relevance to the organisation s culture 08 June

9 Background Risk Management Framework Commitment Accountability Dedicated resources Relevant to the organisation Integration Adoption Review and Improvement 08 June

10 Background Risk Management Process What is the Risk? How serious is the Risk? How do we mitigate the Risk? How do we sustain the mitigation of the Risk? 08 June

11 Background Enterprise Risk Management Process ERM Process Likelihood Filter Impact Controls Protects against threats to Strategic Objectives 10

12 Background Traditionally some organisations have maintained separate Business Continuity Management and Enterprise Risk Management arrangements Silo effect ERM Process Threats Impacts BCM Process Likelihood Functions Filter Filter Impact Threats Controls Plans Protects against threats to Strategic Objectives Recovery of Business from Interruptions 11

13 Disadvantages of Silo Overall two separate practices may result in: The key risks threatening the organisation may not be mitigated In turn resulting in: incorrect investment in controls increased expenses a reduced bottom line 12

14 Our proposition ERM and BCM should be completed together BCM is part of an effective ERM Framework 13

15 Traditional BCM Business Impact Analysis Business Impact Analysis Division 1 Division 2 Division 3 Division Function/Process Scenario 1 Function/Process Scenario 4 Plan 1 Plan 1 Function/Process Scenario 2 Function/Process Scenario 5 Plan 2 Function/Process Scenario 3 14

16 Typical ERM Risk Identification and Assessment Risk Identification And Assessment Division 1 Division 2 Division 3 Division Risk Scenario 1 Control 1 Risk Scenario 2 Control 2 Risk Scenario 3 15

17 New Approach to Enterprise Risk Management Framework Enterprise Risk Management Framework Division 1 Division 2 Division 3 Division Risk Function/Process RIA -Control 1 BCM Plan 1 Risk Function/Process RIA -Control 2 BCM Plan 2 Risk Function/Process 16

18 How can we integrate? A combined process Business Strategy Interviews and workshops Key RM activity BCM activity Integrated RM/BCM activity Key risks / threats Key processes Identification of Risks Impact of interruptions upon key processes Risk Map Risk Register Threats, Impact, Likelihood Dependencies Vulnerabilities Impact Risk Strategy & Controls (Preventative) Business Continuity Plans (Mitigation) 17

19 How can we integrate? Business Impact Analysis The Risk Likelihood Consequence Risk Rating Function affected Risk 1 Almost certain Very High Function 1.. Function n Risk 2 Likely High Function 2.. Function n Enterprise Risk Register Risk Risk Risk Rating Financial risk Risk 1 Risk 2 Strategic risk BCP Operational risk IT Risk BCM is a means of controlling relevant disruption related risks to the organisation 18

20 Why integrate? Considerations: BCM looks to provide ERM with: A better understanding of the critical activities (processes) and the infrastructure & resources that support these An existing risk mitigation framework Promotes whole of business communication of critical functions ERM looks to provide BCM with: A broader view of risk Systematic approach of consistently and continuously monitoring and managing risk Promotes cross divisional communication of key threats A better view of any emerging threats 19

21 Why Integrate? Traditionally BCM: Concentrates on mitigating the high consequence threats to functions such as an earthquake, flood or fire Then looks to mitigate the threats through Business Continuity Plan Disadvantage of segregation : Business may lose focus upon the high likelihood low consequence risk responses e.g. fraud, privacy breaches, data losses etc due to high impact priority Mitigation through BCM 20

22 Why Integrate? Traditionally ERM: Prioritises risks and risk treatments based upon Likelihood and Consequence Concentrates upon high likelihood and high consequence risks Mitigation through ERM Disadvantage of segregation: Business may lose focus upon the high consequence low likelihood e.g. disruption events due to low risk rating resulting in lower treatment priority 21

23 Why integrate? An integrated approach provides: Better coverage of the risk map Better prioritisation of resources More pragmatic risk treatment More efficient investment in risk management Mitigation through ERM Mitigation through BCM 22

24 Governance Structure Two possible ways to integrate: One division/department for both ERM and BCM Dedicated resources for the two practices for risk identification and mitigation Threats and Impacts rated based upon ERM tools Monitored by Chief Risk Officer or Chief Financial Officer Risk Management Division ERM BCM Useful for organisations BCM and/or ERM teams that require further maturity 23

25 Governance Structure Two separate departments May have been developed as a reaction to specific reactive needs Consistent and continuous communication between BCM and ERM teams Threats and Impacts rated based upon ERM tools Monitored by Senior Management and the Board ERM Team BCM Team Useful for organisations with already established separate BCM and ERM teams 24

26 Governance Structure Ways to initiate change Cultural adoption through incentives by: reward through recognition increase initial divisional budgets for risk management individual/divisional KPIs What s necessary? Champions and resources Commonality between ERM and BCM i.e. tools, definitions etc. Promotion of benefits to other stakeholders e.g. CFO, Board etc. Who can support you? IT Audit Function C Suite Operations 25

27 Governance Structure An integrated governance framework will: Creates Efficiency Improves Risk Profile Promote a Risk Aware Environment Implement effectives systems that: Are sustainable Strengthen Independence of RM Function Align with Business Objectives Managing Risk is Everybody's Responsibility 26

28 Summary What have we learnt? Background BCM, ERM, silo effect due to separation Method of integration Consideration of key risks when developing the BCP Advantages of integration Efficient coverage of risk map and use of resources Governance structure Framework, implementing change, benefits THANK YOU!! Questions? 27

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