Prior to the global banking crisis, there were some irresponsible executives and organisations in the financial services world who had little regard for good risk management and saw it as an obstacle to growth and enterprise. They wanted to take risks; they didn’t want to consider what might happen if these risks actually failed and what impact this might have. But recent events have changed everything. The value of good strategic risk management has gained greater recognition – not only as an essential element of responsible business management but also as a key tool for stability and growth.
Darren Smith, Head of Compliance and Risk at Equiniti, has noticed this change in perception. Equiniti has always placed a firm emphasis on intelligent, comprehensive risk management with strong leadership from the Board down – it’s been a key element of the company’s success and significant growth since its inception in 2007.
Equiniti recognises the need for change and diversity and it has an appetite for risk. However, that risk is carefully balanced with a strong risk management culture and detailed awareness of the potential consequences, and the ways in which any negative impacts can be mitigated. Sharing that expertise and providing robust assurance on how effective Equiniti is at assessing and managing risk is now in greater demand from clients who appoint Equiniti as a key supplier or partner.
“Client engagement on risk has significantly ramped up,” says Darren. “Clients more and more want to know that Equiniti takes risk management seriously and that this culture is embedded throughout the organisation.”
Darren is at the helm of Equiniti’s risk function that provides the methodology to assess, identify and manage risk. “It is not our role to tell the business what the risks are and how to manage them,” he says. “They are the experts in what they do, we are there to provide them with the tools to do this and offer expert guidance and support.”
This involves risk management policies that are continually reassessed and developed as the business changes and evolves. His team also ensures that effective information on risks and risk management is in place to support the Board’s risk governance and is focussed on enhancing risk awareness throughout the business. With this strong support and oversight, the business is able to clearly establish its risk appetite and understand how it is performing against this appetite.
The principles that Equiniti have adopted are mandatory throughout the organisation. “We have strong risk management controls evidenced in our regulated business areas, and we extend that level of control across all business areas,” Darren says.
Equiniti continually reviews its approach to risk and benchmarks itself against the expectations of the FCA and those of its clients. “Our system is mature,” says Darren, who has over 13 years experience in risk management and compliance within the industry. “It’s based on our heritage in responsible financial services and we take it very seriously – our reputation and the reputations of our clients are paramount.”
Equiniti’s approach to risk management is based on a three lines of defence model. “The first line of defence is the business and its operational managers who are responsible for the application of effective systems and controls,” says Darren. “My team is the second line of defence, as we develop policies, oversee their implementation and generally enhance awareness. Finally, Equiniti has an experienced internal audit function that independently assesses these first two defences.”
Equiniti also adopts an Enterprise Wide Risk Management (EWRM) approach which provides a sound platform to identify all key risks that may exist or emerge from its business activities. “EWRM breaks down risks into a number of core areas such as process and resource risk, legal and regulatory risk and financial risk,” says Darren. “Each of these risk areas is then assigned by Equiniti’s CEO to an owner at executive management level. Risk owners are responsible for establishing risk appetite which is agreed with the Board and ensuring that the level of risk being run is in line with this appetite. The risk profile of all Equiniti business areas is reviewed and subject to challenge regularly through our Compliance & Risk Committee and Audit Committee.”
The most important aspect of risk is that it is not just a top management issue, it’s a company culture issue. “People are encouraged and supported in assessing and managing risk as a key part of their every day jobs,” says Darren. “It’s something we all do to protect both Equiniti and our clients. The more aware that people are of risk, the more that everyone benefits.”