Risk management takes jitters out of business

by Karen Cheung

Patrick Rozario, principal of business risk services, Grant Thornton
Photo: Edde Ngan

Growing demand on risk management services creates ample opportunities for aspired professionals

With Hong Kong now a recognised international business, banking and trade centre, all industries are exposed to different kinds of risks, and therefore require different kinds of risk management.

With the coming of the Internet, the world has "shrunk" and businesses have become subject to different jurisdictions and environments. While business has been speeded up, the risk factor for the companies involved has become higher and more complex.

For example, companies with big factories and workforces in China can be seriously affected by fluctuations in exchange and interest rates. Contingency planning for these and many other possibilities is the key to business stress management, says Patrick Rozario, principal of business risk services, Grant Thornton.

"The three main types of risk today are environmental, business process and information decision risks," Mr Rozario says.

Environmental risk is governed by external factors such as risks related to the external financial market; and competitor risks, which are harder, though not impossible, to control.

Business process risk, on the other hand, is internal. "Good management of such risks will see good control of business process, reduction of error and fraud detection," Mr Rozario explains.

Good control of information decision risk springs from the accurate and timely collection of information that directly affects business decisions.

"The way to manage risks is to deal with it actively and confront it head-on," says Mr Rozario adds. "There are many ways to cope with these risks such as insurance and implementing good and effective control procedures."

He finds that many businesses are confident in their area of expertise, but not in managing their businesses in the context of the financial market and the global picture, or understanding the jurisdictions. That's when business risk services have an important part to play.

Rapid expansion

In the past three years, risk management in Hong Kong has seen rapid development. The main reason is the expansion of services in relation to China, which has resulted in heavy demand for risk management experts.

"China is like a vacuum cleaner that sucks up most of our accountants," says Mr Rosario.

This is the result of two factors — the massive China market, and the fact that as Hong Kong has evolved into a global financial centre, it has for many years been an incubator of accounting and risk management talents.

Hong Kong offers young trainees a good base with a strong global network and good training exposure. With the China market continuing to boom, and steady demand for accounting and risk management talents likely to continue in the years to come, the profession anticipates rapid and continuing expansion.

Mr Rozario suggests that fresh graduates as well as experienced managers who are interested in accountancy should consider the long-term prospects and career development that the profession offers. There are many opportunities in the professional environment and the commercial sector.

The training, which includes risk assessment and basic technical skills, is quite similar from firm to firm. However, once they've grasped the skills, there are plenty of career opportunities in different areas such as risk management, internal audit and internal control.

Specialist areas

The many specialist areas in risk management include corporate governance, internal control, internal audit, technology risk assurance and advisory, external audit support and Sarbanes-Oxley compliance.

Corporate governance, also known as "tone-at-the-top", is the advice given to the senior management or the board of directors of a company on the way they set the tone and culture of their company.

With internal control, the risk management expert designs and implements control systems to identify errors and frauds, which in turn ensures timely and accurate decisions for the company.

Most large listed companies have independent internal audit control departments which carry out independent reviews of the internal control system and report directly to the board of directors. Such services are sometimes outsourced to professional accounting firms.

Technology risk assurance and advisory focuses on the control and governance of IT systems in areas such as security, exposure and confidentiality.

Sarbanes-Oxley compliance, a US legislation related to internal control requires the assessment of internal control with tougher and stricter procedures to ensure the financial market is run under an effective system. To minimise error and maximise accountability, this must be signed off by external audit as well as the company's board of directors.

Mr Rozario encourages graduates from all disciplines to consider entering accountancy and risk management. "Our employees come from all sorts of background, only half are accounting graduates," he points out. "The others are from such different disciplines as engineering, computing and even languages and communication."

New recruits are given systematic and structural training to learn the latest accounting techniques. There are also secondment programmes around the world. "The hard skills can be learnt," says Mr Rozario. "It's the character and what the candidate has to offer that makes the difference."

Risky business

  • Three types of risk: environmental, business process and information decision
  • Specialist areas in risk management include corporate governance, internal control, internal audit, technology risk assurance and advisory, external audit support and Sarbanes-Oxley compliance
  • Expansion of services in relation to China creates heavy demand for risk management experts

Taken from Career Times 09 March 2007
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