In the wake of so many meltdowns, such as the 2023 collapse of Silicon Valley Bank and the 2022 implosion of FTX cryptocurrency exchange, as well as events like the 2021 Archegos Capital Management collapse, the 2021 Suez Canal obstruction, and the far-reaching impacts of the 2020 COVID-19 pandemic, investigations have consistently revealed significant shortcomings in risk management practices, raising the critical question of whether these catastrophes could have been mitigated or even prevented with a more robust and risk based thinking, planning and decision making.

The evidence points to a stark reality: while the world hurtles towards a future fraught with escalating AI and cyber threats, geopolitical instability, climate change-induced disruptions, and unprecedented technological advancements, risk management methodologies remain trapped in the last century. The gap between the escalating complexity of risks and the usefulness of heatmaps and risk registers is widening, threatening to swallow organizations whole.

Many risk managers find themselves hostages of outdated frameworks. In private conversations, they tell me they want to break free from the shackles of Risk Management 1 (RM1), but regulators and management hold them captive. I understand your pain, your frustration, and the seemingly insurmountable obstacles that stand in your path.

A shared struggle, not an accusation

If you find yourself nodding along to these all-too-common excuses, know that you’re not alone.

• “I don’t have the knowledge”: The world of risk is evolving at breakneck speed, and it’s easy to feel overwhelmed by the constant need to learn and adapt. The fear of the unknown, of uncharted territories, the math involved in risk analysis keeps you chained to familiar tools. But deep down, you crave the confidence to navigate this complex landscape.
• “I don’t know where to start”: The transition from RM1 to RM2 can seem like a daunting leap into the unknown. The labyrinth of RM2 implementation seems like an impenetrable maze. I always say in RM2 there is no one risk management, each decision requires a separate methodology. That’s a scary thought. You yearn for a clear roadmap, a guiding light to illuminate the path forward.
• “I’m busy with other things”: The demands of daily operations often leave little time for strategic initiatives like implementing a new risk management methodology. The siren song of immediate gratification lures you away from the arduous task of change. You crave the efficiency to tackle both the urgent and the important.
• “I’m not convinced RM2 makes a difference”: The benefits of RM2 may not always be immediately apparent, especially when compared to the familiar comfort of RM1. Skepticism clouds your vision, and you long for tangible proof of the transformative power of RM2.
• “Integrating into decision-making is too hard – other departments won’t play ball”: Risk management isn’t a siloed function. RM2 requires active participation from all levels and departments within an organization. The prospect of aligning diverse perspectives, navigating organizational politics, and securing buy-in from key stakeholders can seem overwhelming. You crave a collaborative environment where everyone understands the value of risk management and actively participates in the process. But the fear of resistance, apathy, or outright conflict can paralyze even the most determined risk manager.
• “RIMS, Regulators, Big 4, McKinsey and FERMA promote RM1 – it must be good enough”: The inertia of established standards can be a powerful deterrent to change. The voices of authority whisper reassurances, but you yearn to break free from the status quo and embrace a more effective approach.
• “My bosses aren’t interested”: Securing buy-in from senior leadership for new initiatives can be a major hurdle. The specter of indifference looms large, but you yearn for the support and resources needed to drive meaningful change.

These are not accusations, but a reflection of the very real challenges faced by risk managers worldwide. I’ve been there, and understand the struggle. But there’s good news on the horizon.

The rise of AI has already revolutionized the risk management application

With intuitive, AI-powered platforms like RAW@AI, the barriers to entry for RM2 have crumbled. Imagine a world where:

• Overcoming risk ignorance: AI can simulate conversations with management, analyze past discussions, and create training scenarios to address resistance to risk management.
• Spotting hidden risks: AI can analyze data sources like sales figures, regulatory changes, and social media to uncover emerging risks and trends.
• Challenging assumptions: AI can validate assumptions in forecasts, project timelines, and operational efficiency targets against historical data.
• Overcoming cognitive biases: AI can identify bias patterns in decision-making and expert opinions, leading to more accurate risk assessments.
• Quantifying effects of risks: AI can simulate scenarios and model the impact of various risks on key business metrics, informing decision-making. Monte carlo is now accessible to anyone.
• Enhancing risk communication: AI can tailor reports for different audiences, create interactive dashboards, and monitor discussions about organizational risk.

With tools like RAW@AI inside ChatGPT, you’re not just adopting a new framework; you’re gaining a powerful ally in the fight against risk. It’s time to break free from the limitations of RM1 and embrace the future of risk management. 100 ideas on how to use AI for risk management optimisation.

Risk managers, this is your moment

The world is changing, and the risks are growing. You have the power to break free from outdated frameworks and embrace the future of risk management. With AI-powered solutions like RAW@AI and RAW2024 online virtual conference, you have the tools and support you need to make the transition to RM2 a reality. Don’t let this opportunity pass you by. The future of your organization depends on it, maybe, your career and you salary definitely do.