Over the last 20 years, we’ve seen some unprecedented events. The pandemic, 9/11, and the financial crisis of 2007-8 have had a massive impact on businesses. The challenge for business is to plan for uncertainty and connect risk management with business operations.
Risk management is a reality check for business. How do stop it from being a source of stress? Read on to learn how you can make it a source of competitive advantage by mitigating the risk with integrated risk management.
Business and Risk
For many businesses, risk management is an afterthought. The dynamic is to move forward and hope to weather the challenges as they arise. This approach feels optimistic and positive.
The problem with optimism is that it fails to address the reality of business life. Success isn’t to be found in just believing you’ll be successful. It’s that same misplaced self-belief that results in the talent show failures that thought they could be a star if only they believed in themselves.
Business success is about realizing the potential in an opportunity and mitigating the risks. It’s not about fearing every obstacle. Risk management assesses those risks and puts attention and energy into mitigating those that are highly likely to arise and those that will have the most damaging impact.
What Is Integrated Risk Management?
Even those businesses that have adopted risk management can do better. Risk management is sometimes regarded as a necessary activity but one that happens somewhere away from the action.
Senior and operations managers want to know that it’s happening but don’t pay it much regard until something goes wrong. Then their interest is too little, too late.
Integrated risk management builds risk management into key business processes. It’s comprehensive, flexible, and enabled by technology. Any and all risks to the organization’s success are in scope and mitigation is integral to business planning, action, and review.
What’s the Harm?
Why do you need integrated risk management? What’s the harm in being reactive to events?
Like a person trying to fix the roof when it rains, failing to plan for risks can lead to regret. When you are managing risk in an integrated manner, you’re more likely to head off threats. You’ll respond to problems better when they are encountered.
Reputational damage, production outages, customer dissatisfaction, and even business failure can all be the consequences of failing to manage risk. Failure to understand the integrated nature of risk and to respond appropriately with integrated risk management is harmful to your business.
Take a Step Back
Integrated risk management allows you to take a step back from the day-to-day operations of your business. Data drawn from across your business helps deliver a broader view of what’s happening. Patterns and trends are clearer so that solutions present themselves earlier and are therefore more effective.
When risk management is a backroom activity, it can’t make much difference to operations. When it’s connected to operations and permeates all aspects of business planning and activity it can be a game-changer.
People, processes, and systems are part of an integrated risk management approach. Each element of the business can impact business success as so needs to be part of integrated risk solutions. That way, management can have their finger on the pulse of the business.
Don’t Take the Risk
Still not sure you need an integrated risk management approach? Assess what you’ve got to lose. Better still, assess what you’ve got to gain.
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