Chartered Accountants Blame Financial Crisis on Poor Risk Management and Lack of Training

In a revealing report from the UK, the global Association of Chartered Certified Accountants (ACCA) said that lack of management understanding of risks contributed to the financial crisis. The report recommends that bank risk management departments are strengthened, including better risk management training.

» You can download the full report PDF here.

Risk management training is nothing new. However, from our experience, it tends to come and go as a trend. It will be “hot” for a year or two, then fade as markets boom or attention is otherwise diverted. The ACCA report emphasizes, and we agree with, the need for risk management as a discipline, impervious to market fluctuations or management fads. This does mean failing to incorporate current market data or events into risk forecasts or analyses. It simply means instituting risk management and training as an essential, permanent part of the organizational culture.

When learning about risk, it helps most to see how others do it. Systematic training plays a role, to be sure, but we’ve seen that nothing beats learning from your peers.  This makes risk conferences particularly valuable. Attendees from the 2007 Palisade Risk & Decision Analysis Conference, for example, comment on getting up to speed fast by seeing different approaches to risk. The 2008 Risk & Decision Analysis Conference on November 13-14 in New York City will address these issues and provide a forum for risk professionals to learn from experts and each other.

Palisade Corporation Risk and Decision Analysis Conference

Many companies have risk management departments, typically related to insurance and loss prevention. Fewer incorporate risk management into daily business operations. There are many other types of risk besides fire, theft, or lawsuits. In addition, if the decision-makers do not understand the risks being faced, then the best risk management techniques will be worthless. For example, Bethesda, MD-based Futron Corporation offers risk assessment and training across hierarchal levels when analyzing project risks. Futron’s Benjamin Juster had this to say about risk analysis training using Monte Carlo simulation that his company received from Palisade Corporation:

“Each of the attendees said that they were able to bring away valuable knowledge from the training, and several have even applied this knowledge to current projects already! It really puts Palisade Corporation on the list of our valued training vendors.”

DMUU Training Team

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