April 2021 Risk Management Business Risks

52 Risks® Gets a Mention in Forbes, Greensill’s Slippery Slope of Risks, Cyber Security Governance and Resilience – What Good Looks Like and 52 Risks® 1st Anniversary

52 Risks® Gets a Mention in Forbes
52 Risks® got a mention in Forbes in the US last week. I was delighted to talk to Edward Segal, a Forbes contributor, on the various supply chain issues and business responses arising out of the blocking of the Suez Canal by the Taiwanese operated Ever Given cargo ship. Yet another reminder of the numerous business and risk challenges in this truly interconnected world. Its also pleasing to see more mainstream business publications focusing on risk management.

You can read his article, ’How To Recover From Suez Canal Debacle And Prevent Another Supply Chain Crisis’ here.

Greensill’s Slippery Slope of Risks 
A little-known UK financier with Australian roots, Greensill, has wreaked havoc across a swathe of financial institutions and small, medium and large businesses across the globe over the past two months. For those that have not heard of Greensill, it was a non-bank lender providing supply chain (or working capital) finance for many businesses. The Group also owned a small bank in Germany. Following the withdrawal of funding and credit insurance support by some of its bank and insurance business partners, Greensill spectacularly imploded in late February. Its entities in the UK and Australia are both in voluntary administration with little prospect of the businesses avoiding liquidation. The German bank has been placed under the control of a court appointed administrator.

For those that have not followed the story you can read more about Greensill on Reuters here  and ABC news here.

Businesses that relied on Greensill for working capital finance are scrambling to find replacement financiers. It is like your bank closing its doors and asking for their loans back in less than 30 days. I am separately writing up a note on Cashflow Risk and Liquidity Risk – key risks in the 52 Risks® framework that these businesses now face. More to come on this in the coming months.

Focusing on Greensill for the moment, it is apparent that a number of keys risks in the 52 Risks® framework were evident. These risks included: Partner Risk, Business Model Risk, Revenue Risk, Liquidity Risk, Financial Leverage Risk, Debtor Default Risk, and Regulatory & Compliance Risk.

Greensill would appear to bear the hallmarks of many similar collapses: rapid growth, a lack of transparency on its true financial position, questionable lending practices, multiple financiers / financing sources, a reliance on short term financing, and opaque governance. No doubt more will come out in the coming months and years as regulators focus on the collapse.

There are always many lessons from large, complex collapses for equity investors, debt investors and business partners. Collapses – be it Enron, Lehman Brothers, HBOS, Royal Bank of Scotland to name a few – have many of Greensill’s characteristics around rapid growth, complex (and often hidden / off balance sheet) financing arrangements, short term liquidity exposures, regulatory arbitrage, and questionable governance.

As is often said, there are arguably no new lessons to be learnt.

Cyber Security Governance and Resilience – What Good Looks Like 
I was invited to speak at the Australian Information Security Association’s (AISA) 2021 Australian Cyber Security Conference in Canberra last month. The conference was the first face to face conference in Canberra since the start of the pandemic, with over 800 physical attendees.

The talk was titled “Cyber Security: Perspectives from the Board and the C-Suite”. At the end of the session, I shared the infographic here on what ‘good’ looks like, for cyber security. Benchmark your company against this and get started today on strengthening governance and oversight of cyber security.

52 Risks® – 1st Anniversary
March 2021 represented the 1st anniversary of the launch of 52 Risks®.

It has been immensely satisfying to have been able to finally publish the framework and assist so many boards, management teams and businesses generally better understand risk management. Many thanks to everyone that has shared the 52 Risks® framework, used it in their business, invited me to talk about 52 Risks®, and sent emails of encouragement over the past twelve months. A particular thank you to the editors, journalists, events’ organizers, and blog writers who saw the value of sharing risk management content during the past twelve months.

Looking ahead, I plan to:

  • expand the range of content on the 52 Risks® website
  • publish a series of 52 Risks® case studies
  • continue to promote the cause of risk management across industry and in the media.

Peter Deans