Donald Joshua Jaganathan: Enterprise risk management harnessing disruption Opening remarks by Mr Donald Joshua Jaganathan, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Institute of Enterprise Risk Practitioners (IERP) Annual Conference 2017 “Enterprise Risk Management – Harnessing Disruption”, Kuala Lumpur, 23 May 2017 * * * It is my pleasure to have the honour of addressing you this morning. I would first like to take this opportunity to congratulate the organisers for successfully gathering an array of distinguished speakers to share their broad-ranging and invaluable experiences. The breadth of the programme over the next few days reflects how vast the area of Enterprise Risk Management (ERM) has evolved, and how much there is for risk managers today to discover, learn and master. In my speech this morning, please allow me to share my thoughts on risk management, amid the so-called “age of disruption”. Technology and risk management Amongst all ‘disruptions’ witnessed thus far, perhaps none have been as forceful and impactful as technological disruptions. Take the smartphone, its use has permeated almost every aspect of our daily lives and has become almost like another limb for some of us. I’m no longer woken up by an alarm clock, nor do I read the papers on “paper” or take photos on a camera. In the palm of my hand I hold a music player, internet browser, GPS navigator, torchlight, and compass, even a wallet in more and more places.

Specific and rules-based regulations, while able to lead institutions in the right direction, do not guarantee the internalisation of such values within bankers nor are they dynamic enough to catch up with new ways of breaching ethics. Therefore, the Bank will also be expanding its supervisory focus on financial institutions beyond balance sheet ratios, and incorporating organisational culture in our radar such as tone from the top, echo from below, accountability, communication, remuneration and performance management. This is a challenging but necessary task that requires creativity in exploring unconventional supervisory approaches including interviews and questionnaires for employees of financial institutions among others..  Risk management as part of business strategy Finally, risk managers must move away from merely compliance and loss prevention. Risk managers must reposition themselves to be more engaged in strategic business decisions within their respective organisations. Chief Risk Officers (CROs) must have a broad and independent view of the organisation, with an ability to anticipate potential disruptions and to influence decision-making. However, according to a global survey conducted by PwC last year, only 1/3 of risk officers view themselves as part of the business. Especially now in the age of disruption, risk managers should not view themselves as mere compliance officers or the mundane department that says ‘no’ to exciting business opportunities. Instead, risk managers need to also think in terms of finding the right risk-return trade-off. Risk management must go beyond the prevention of losses and play an active role in driving business sustainability and enhancing shareholder value.