Sophie Mauclair

Old Habits Die Hard: Why risk categorization is dangerous the way we do it   Every risk manager learns early on: risks must be categorized. Financial, operational, external, strategic. But risks don’t live in categories. And pretending they do can be very dangerous. Have you ever critically asked yourself: What is the purpose of categorizing risks?   Placing a risk into a single category, we may inadvertently overlook its full scope. We might confuse cause with impact, apply the wrong governance or management approach, or miss a vulnerability entirely.   Take the liquidity squeeze during the COVID crisis. Was it an external risk because the pandemic was beyond our control? Was it a strategic risk because some companies had chosen thin liquidity buffers? Or was it a preventable risk because weak treasury processes left firms unprepared? The truth might be that it was all of these at once. By forcing it into just one box, we overlook essential dimensions and make poor decisions about the actions to take.   Or consider currency risk. Exchange rates are clearly external; no company controls them. Yet, whether a firm is severely impacted depends on strategic choices, such as how much exposure to leave unhedged. Even when hedges are in place, failures in treasury processes can turn this into a preventable risk. Again, one risk, three distinct perspectives.   So what’s the remedy?   Use the risk categories for structure and ownership, but not for any other purpose. For every risk, ask explicitly: Where does it originate, and who is responsible for it? Why does it matter, and which objectives are threatened? How should we address it, through controls, through risk–return dialogue, or through resilience?   Consider all three views. Each of these questions reveals something entirely different. Alone, each is incomplete and leads to poor decisions. Show source, impact, and management response side by side to start productive discussions.   Focus decisions: Categorization is just a means to an end. The goal is to achieve clarity on responsibility, decision-making, and commitment to action. This changes the role of risk categorization fundamentally: it triggers the right conversations: Who is responsible? What is really at stake? What can we do about it?   Old habits die hard. But it’s time to break this one: stop managing categories, start managing decisions. Institut für Finanzdienstleistungen Zug IFZ Lucerne University of Applied Sciences and Arts

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Heat Maps in Risk Management – Turning Data into Decisions When managing risks, we often collect detailed assessments, numbers, and narratives. But raw data doesn’t always guide action. That’s where a Heat Map becomes one of the most effective tools. What is a Heat Map? A heat map visually plots Impact (severity of the risk) against Likelihood (probability of occurrence). By placing risks on a grid, we instantly see which ones demand attention versus those that can be monitored or accepted. 🔴 High Impact + High Likelihood → Critical risks. These can threaten financial statements, operations, or compliance. Example: A cyber breach in a bank leading to customer data theft. 🟠 High Impact + Low Likelihood → "Black Swan" events. Rare, but could be catastrophic. Example: A major regulatory change overnight. 🟡 Medium Impact or Likelihood → Manageable risks. Require monitoring, periodic review, or partial mitigation. 🟢 Low Impact + Low Likelihood → Minimal risks. Often accepted as part of normal business operations. Why Heat Maps are Powerful Clarity: Converts complex assessments into a single visual snapshot. Prioritization: Helps leadership focus on what matters most. Alignment: Ensures all stakeholders – from control owners to the board – see risks the same way. Resource Allocation: Guides where to invest in stronger controls, monitoring, or automation. Practical Use in Risk & Compliance In SOX audits, heat maps help prioritize which financial reporting risks and controls deserve the most testing. In cybersecurity, they identify high-risk threat areas needing stronger defense. For operational risks, they guide management in balancing cost vs. benefit of mitigation. Key takeaway: A heat map is not just a colorful chart—it’s a decision-making compass. When used effectively, it bridges the gap between raw risk data and actionable strategies. 📌 Question for you: Do you use heat maps mainly as a reporting tool, or do you actively update them to guide real-time decisions? #RiskManagement #InternalAudit #GRC #Compliance #Governance

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How do we build organizational risk culture and accountability? Building true risk culture and accountability starts with integrating risk thinking directly into daily decision-making - well before risks become issues or show up in compliance reports. Instead of separate, ritualistic risk processes, organizations should embed discussions about uncertainty - what could go wrong or better than planned - into core business activities like planning, budgeting, and investment decisions. This means updating existing policies, KPIs, and even committee charters to explicitly include risk roles and expectations. A strong risk culture also depends on leadership setting the tone: encouraging open conversations about uncertainties, rewarding proactive risk identification, and making risk-adjusted results part of how success is measured. Case studies show that when employees see risk management as relevant to their objectives - not just a compliance task - they take real ownership. For practical steps and examples from diverse industries, I recommend reviewing the RISK-ACADEMY guide on risk culture: https://lnkd.in/eNjqpMJq How does your organization encourage teams to talk openly about uncertainties in day-to-day decisions? #RiskCulture #DecisionMaking #Accountability #RiskManagement #Leadership Written by advanced risk management AI at https://riskacademy.ai

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>>> Key Benefits of Risk Assessment: ● Proactive Risk Management: Anticipate and manage risks before they become major issues, reducing the likelihood of adverse events. ● Informed Decision-Making: Provide valuable insights for decision-making, enabling organizations to make informed choices about investments, projects, and operations. ● Improved Resilience: Enhance ability to withstand disruptions and recover quickly, minimizing the impact of adverse events. ●Cost Savings: Reduce potential losses and costs associated with risks, including financial, operational, and reputational costs. ● Regulatory Compliance: Ensure compliance with regulatory requirements and standards, reducing the risk of non-compliance and associated penalties. More related topics coming your way tomorrow! #Staytunedformore #Learnandgrow

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𝐅𝐀𝐈𝐑™ + 𝐅𝐀𝐈𝐑-𝐂𝐀𝐌™: 𝐓𝐡𝐞 𝐆𝐚𝐦𝐞-𝐂𝐡𝐚𝐧𝐠𝐞𝐫 𝐟𝐨𝐫 𝐓𝐡𝐢𝐫𝐝-𝐏𝐚𝐫𝐭𝐲 𝐑𝐢𝐬𝐤 𝐀𝐬𝐬𝐞𝐬𝐬𝐦𝐞𝐧𝐭 Third-Party Risk Management (TPRM) has long relied on audits, surveys, and qualitative maturity scores. But let’s face it — checklists don’t tell us what really matters: • How likely is a third-party risk event? • What’s the true financial impact on your organization? That’s where 𝐅𝐀𝐈𝐑™ 𝐚𝐧𝐝 𝐅𝐀𝐈𝐑-𝐂𝐀𝐌™ come in. Together, they transform TPRM from a compliance-driven exercise into a quantifiable, financially meaningful risk assessment. 𝐇𝐞𝐫𝐞’𝐬 𝐰𝐡𝐲 𝐭𝐡𝐢𝐬 𝐢𝐬 𝐚 𝐠𝐚𝐦𝐞-𝐜𝐡𝐚𝐧𝐠𝐞𝐫: • Quantifiable Risk: Move beyond 1–5 maturity scales to measurable, data-driven insights. • Scenario-Based Analysis: Understand how third parties influence both likelihood and impact across all risk scenarios. • Smarter Control Evaluation: FAIR-CAM™ allows consistent assessment of controls across both your organization and third parties. • Actionable Insights: Use the results to inform contracts, SLAs, and investment decisions. 𝐇𝐨𝐰 𝐭𝐨 𝐆𝐞𝐭 𝐒𝐭𝐚𝐫𝐭𝐞𝐝 𝐰𝐢𝐭𝐡 𝐀𝐜𝐭𝐢𝐨𝐧𝐚𝐛𝐥𝐞 𝐓𝐏𝐑𝐌: • Identify 3–5 third parties that have the biggest impact on your business. • Run tabletop scenarios (e.g., phishing → credentials stolen → customer data exfiltrated). • Map existing + missing controls with FAIR-CAM™. • Quantify how control improvements reduce likelihood and impact. • Leverage insights to drive smarter negotiations and resource allocation. The bottom line? FAIR™ + FAIR-CAM™ give you the power to stop guessing and start quantifying. Because when you can measure third-party risk in dollars and cents, you can finally make decisions with clarity and confidence. 𝐀𝐛𝐨𝐮𝐭 𝐭𝐡𝐞 𝐚𝐮𝐭𝐡𝐨𝐫𝐬: This piece honors the late Denny Wan, a pioneering FAIR leader whose work inspired this field. 𝐂𝐨-𝐚𝐮𝐭𝐡𝐨𝐫𝐬: Gregory Rasner (Cybersecurity & Third-Party Risk) and Andrew Shea (Founder, CRFQ). Ready to explore how quantifiable TPRM is shaping the future of cyber risk management? 𝐃𝐢𝐯𝐞 𝐢𝐧 𝐡𝐞𝐫𝐞: https://lnkd.in/dmNJQd9U #CyberRisk #FAIRModel #FAIRCAM #ThirdPartyRisk #TPRM #RiskManagement #Cybersecurity #FAIRInstitute

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