The Accountant Nov-Dec 2016

MANAGEMENT
This is how I further prefer to view
this relationship; the tone at the top as
“the head”, employees as “the hands and
feet” and the available resources as “the
back” of this body called ‘the organization.”
Why do I say this? I say this, because as
the head of this “body”, the tone at the
top develops strategies that breathe life
into the organization, they represent the
vision of the organization and should
be able to protect the organization from
risks that may harm the organization by
implementing effective strategies. This is
the mind of the organization that thinks
and speaks on behalf of the organization.
Think about this; what would you do
when you want to drive your motor vehicle
for example? or if you wanted to construct
a building, or to swim? The use of your
hands and feet would be required to be
successful in performing these activities.
The employees as the “hands and feet” of
an organization, perform their various
roles to move the organization from one
point to the next. The move may either be
progressive or retrogressive (unfortunately).
The tone at the top will make decisions
but the implementation of these decisions
has to be performed by the employees
regardless of whether the decisions are
beneficial to the organization or not.
Why do I say the available resources
are the backbone or spine of “this body”?
I say this because I believe these resources
support the operations of an organization
in ensuring it remains sustainable. I
compare this to the human backbone which
provides support to the human body. What
happens when you obtain a back injury for
example? You lose support of your entire
body and can no longer perform activities
as you normally would. Similarly, if an
organization lacks sufficient resources, it
would lose support and would no longer be
able to operate to its full capacity.
To me, this is where the issue of
enterprise risk management comes in as
the ‘heart’ of an organization to breathe
life and sustain all ‘these parts of an
organization’.
Let us go back to these ‘body parts’ shall
we? Will it be possible for the tone at the
top to make informed strategic decisions
that will drive sustainability without
conducting a proper risk management?
How will strategic risks for example be
identified and mitigated against without
implementing risk management practices?
What about employees who run the
operations of the organization? Will they be
able to achieve corporate objectives if they
are unaware of where the key risks lie and
how to mitigate them? Let’s say Company
X, a manufacturing company has one of
its major corporate objectives as growing
profits by 75 per cent within a financial
year. If the company was to conduct a
risk assessment in its factories, one of the
key risks identified would probably be
the risk that some of its machinery would
breakdown during production that may
significantly reduce output.
How then can company X manage this
risk? I would say, as a mitigation measure,
by ensuring that production equipment is
properly maintained.
Supposing the Factory manager who
should be ideally the risk owner has no
knowledge of this measure or totally
disregards that this mitigation technique
would contribute immensely to the
achievement of this corporate objective;
would the corporate objective of growing
profits by 75 per cent be achieved within
the stipulated time frame?
On that account, I conclude by stating
that as an ‘expert witness’ of the benefits
of enterprise risk management to an
organization’s operations, I would propose
that an organization should consider
enterprise risk management to be the
‘heart’ of that organization rather than
being ‘at its heart’. This ‘heart’ should
be nurtured and protected at all times.
According to me, this is the best way the
‘heartbeat’ of an organization will be felt by
other organizations and there is no doubt
that ‘heartbeat’ is life and life is opportunity
for growth.
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