Besides managing risk, risk managers must also have a knack for good stakeholder management. In fact, in order to provide effective leadership in today’s corporate world, risk managers and those who have a risk management function, must understand the significance of good stakeholder management. Considering the high employee and investor turnover rates it is no wonder that risk managers must take the lead in providing risk management information to various stakeholders not only from a compliance perspective but from a profit/loss perspective as well.
Who are the various stakeholders that a risk manager must concern himself or herself with? Of course the more sophisticated a company is the more stakeholders there are. Nonetheless, the main stakeholders of any company or organization usually include:
2. Upper Management including the Board
7. Business partners; and
8. Credit Analysts
Each group of stakeholders mentioned above is important to the overall success or survival of a company. They may have a key role in determining the strategy of a company and therefore need to understand relevant risk related information in order to understand the issues facing the company. Of course, depending on the various laws and regulations facing companies, it may be there are in fact reporting requirements that should be met. The Board as well as Upper Management has risk management responsibilities when it comes to addressing risk, and in order to provide effective leadership, Management must look at Stakeholder Management as part of good Corporate Governance.
The first step for any risk manager when dealing with stakeholders is to ask the hard questions such as: (i) Are you prepared to handle risk events relating to your stakeholders? (ii) In a crisis management event, are you ready to address your customers? (iii) In case of litigation, do you have the right information to communicate to your regulators? , and (iv) What are the risk management process to use in case you have major employment related issues?
Providing effective risk management leadership requires the risk manager to understand who the major stakeholders really are and what risk management reporting processes actually exist or should exist. Once you can answer these questions, you are on your way to provide effective risk management leadership.