Risk e-Views Vol 25 December 2012 – Risk Leadership: The Value of Independence

I just read an article in a newsletter published by the Macquarie University natural hazard research group, Risk Frontiers, discussing the case of the six Italian scientists and a government official who were found guilty of manslaughter for “failing to adequately communicate the level of risk” regarding an earthquake swarm. Their conclusion – “A need for separation between the roles of scientists and that of authorities responsible for civil protection is strikingly clear. Scientists need to be independent and provide scientifically-grounded risk assessments not biased to the needs of an administrator”.

This was on the back of a colleague in the risk profession asking me about the separation of the roles of risk and audit because he was feeling increasingly conflicted while performing both roles. The message is clear: A lack of independence creates temptations of many kinds to twist the truth.

Below is a value model for independence that extends well beyond the avoidance of jail terms. It explores some of the drivers of temptation and shows the benefit of remaining independent. How do you overcome some of these temptations and remain independent and objective when giving your advice?




Here are some tips for a range of professional situations:

Audit Professionals: Stick to auditing. If you set up the risk process and you help populate the risk profiles you are conflicted when it comes to providing assurance to management and the Board. By all means consult on risk for another client, but don’t carry out both roles for one client.

Insurance Brokers: Whenever possible earn a fee for service and don’t take brokerage or other fees from insurers. If that is not practical (and you may surprise yourself if you give it a go while explaining the reasons to your clients), then create a value statement for your company concerning independent, objective advice and preach this consistently to your staff. Above all, act always in fulfillment of your value statement as staff will act as you act.

Risk Advisers in Organisations: Don’t get too close to the managers who actually manage the risk. They often can’t see the forest for the trees and that is not their fault. Above all, stick to your principles and be prepared to resign. To be as comfortable in this position as possible, ensure you maintain a healthy professional network to support you, address any hearsay and to get you to your next role where your rewards will be greater still.

Everyone: It’s all about managing reputation risk. You are only as good as your last piece of advice.