Swiss SMEs caught in regulation net

Risk managers in Switzerland who are concerned about the forthcoming regulations concerning governance should not be too worried about it. This was the conclusion of a round table discussion held on Sunday, organised by StrategicRISK and sponsored by ACE Europe. In many ways, the proposed changes were relatively benign, but, given that they would apply to companies with revenue as low as CHF20m many businesses that had hitherto not fallen into the regulatory net would now be affected.

Participants in the discussion were, however, concerned by two factors. The first was that companies who were already doing creative risk management might find their initiative stifled by the need to comply with a formal framework for auditing internal controls, unless that framework proved flexible enough to accommodate a range of practices.

The second was that a formal requirement for an internal control system was relatively easy to comply with, but that this could pose the danger that companies might rely on window dressing exercises rather than seeking to use risk management to search out true value.

In general, effective internal controls were perceived to be of vital importance, but the initiative to implement them properly had to come from the board. In an ideal world, auditing should be risk based rather than control based, a subtle, but important difference.

As far as small and medium enterprises were concerned, participants felt that the new regulatory environment might provide an opportunity for SIRM to help bring the benefits of risk management to a wider audience.

The discussion also covered what emerging risks were thought to be of greatest importance. IT risk, climate change, energy, demographics and the gradual shift of economic power eastwards, with the potential political instability that this might imply were all cited.

But some of the most interesting discussion revolved around the idea that it was the increasing complexity of the global business environment and the inability of a company operating in isolation to begin to understand it that posed the most serious emerging risk of them all.