It’s A Risky Business, How do you Protect your Organization ?
In the face of economic, technological, environmental, political and socio-cultural changes, the threats to businesses continuously rise every day. These risks grow not just in terms of number and variety, but also in terms of the extent of the potential damage that each can do to the organization.
As a result, organizations are starting to direct their focus on Risk Management initiatives and implement a framework for effective and efficient corporate governance.
Risk management basically involves four stages.
- Identification of the risks. To be able to effectively manage risk, understanding what threats are present and acknowledging the potential impact of these threats. More common types of risks that most organizations face include the following.
- Operational Risks
- Financial Risks
- Strategic Risks
- Sustainability Risks
- Compliance or Regulatory Risks
- Reputational RisksThere are other tools for risk identification and assessment that can be used such as the PESTLE categories. Using various standards like the ANZ Risk Management Standard 4360:2004 and the US Securities and Commission Form 10-K as a framework for identification of organizational risks.
- Understanding of the drivers and triggers of these risks and assessment of the potential impact these risks present to the organization.
- Development and implementation of risk mitigation strategy. These are usually risk-prevention steps such as undergoing due diligence qualifications of suppliers before on-boarding, auditing for continued compliance, regular performance reviews and engaging third-parties to do risk monitoring and reporting.
- Develop a Risk Contingency Plan to be deployed when the high-risk event occurs, or more proactively, after identification of sufficient warning signs of the eventuality of the threat. The contingency plan serves to lessen the impact of the risk when the threat eventuates. Risk contingency plans are often very detailed in nature and define exactly the steps that must be followed by each function and individual affected. It is also a best practice to regularly test these contingency plans for effectiveness, reviewed regularly and updated as necessary.
Risks are pretty much commonplace in the business world, but with changes happening on all fronts, it is only expected to rise and become more formidable than ever.
The ability of an organization to manage these risks and uncertainties would illustrate the agility of an organization to prevail upon these negative forces and ultimately secure its continued existence.