6 Trends in Risk Management to Consider for Your Business
Wednesday July 01, 2020,
5 min Read
With the increase of global trade, the interdependence of economies of various countries has increased. Hence, the businesses today not only face local risks, but are also prone to the risks arising due to global events. The progress made in digital technologies and their application for convenient consumer services and seamless communication, raises the risk for secure data maintenance. In addition, businesses face several risks arising from the change in regulatory government policies, natural calamities, legal issues, improper functioning of operational assets, financial risks and many others. It may not be possible for the businesses to completely avoid all the risks at all the times, hence, it is important to manage the risks with reasonable precautions and steps.
Business leaders are all likely to appreciate the fact that the business risk profile and risk exposure has evolved a lot in the recent times. Hence, the steps to manage the risks also need to evolve accordingly. Companies may consider external help of risk management consultants/ experts for risk management initiatives.
To check the trends in risk management, risk mitigation and accountability please keep reading!
Having a dedicated Risk Management department
In today’s business scenario, companies can no longer afford to ignore risk or act late in a reactionary mode, when a risk arises. Businesses must be ready well before hand with a reasonable risk management plan to tackle risks as and when they arise. Hence, it is important to have a dedicated risk management department that plays an important role at strategic level and decision making. While making any business decision, it is important to have a holistic view from risk management perspective – identification of risks, access the risk impact, find options to mitigate the risks, prepare an action plan to mitigate an identifiable risk, and have reasonable provisions to tackle any unknown or unpredicted risk.
Direct Involvement of the Leadership Team
Looking at the strategic importance of risk management, and its impact on the businesses, these days leadership teams are directly involved in the risk management process. The risk management systems may be as per the internal company policies or as per the client requirements. Modern clients also look to incorporate the contract clause for data privacy and the steps required to mitigate data risks. Moreover, the compliance risks may also have legal impacts on the businesses – companies may seek help of regulatory and government policy consultants/ experts, in case they do not have in-house expertise. In a few countries, the management team is required to personally sign the financial statements for their accuracy and transparency. Looking at these high impacts of various risks on the businesses, leadership teams prefer to have direct involvement in risk management practices and policies of the company.
Create a robust risk management culture in the company
Risks cannot be managed only by the risk management team or the leadership team. Each and every employee or associate requires to play a role in risk management. Hence, it is important to propagate a strong and robust risk management culture among all the employees irrespective of their job roles and designations. Employees should be made aware about various risks that exist in the overall business and the risks in their own job roles. Employees should be encouraged to stay vigilant and report any identified risks through a proper reporting channel. Proper systems and policies should be created with restricted access at sensitive areas; also, the systems and policies must be strictly followed to mitigate any risk, bring the discipline in the workforce and highlight importance of risk management so that it is taken seriously by everyone in the company. Moreover, the companies may consider to include employee behavior with regards to risk as one of the performance parameter in their overall performance review.
Continuous Risk Monitoring to Ensure Swift Corrective Action
With the development of digital technologies such as Internet of Things, Machine Learning, Artificial Intelligence, Drones, Mobile Apps, etc. it has become very easy to monitor risk and gather data continuously. In today’s time, gathering of vast amount of data, analyzing it and generating insights has become efficient, effective and easy than ever before. This enables the companies to swiftly take corrective action and implement plans proactively as and when the risk is identified. Digital technologies have made it easier for businesses to continuously monitor all the processes across the company from a risk perspective. It also enables the companies to have a holistic risk approach rather than viewing them in silos – be it the data risk, risk of operational assets such as chemical pressure vessels or factory machines, financial risks, employee health risk or any other.
Proactive and Flexible Risk Management Approach
Businesses no longer look at risk management or regulatory compliance as something that is forced upon them. But now there is a strategic shift in the way businesses look at the risks and compliance – an opportunity to create confidence in the customers, workforce and business partners by going a step above what is required and expected. As the risks faced by businesses have evolved in recent times, they are now more proactive and more flexible in their approach than ever to tackle the risks to ensure minimum business impact.
Availability of Risk Transfer Instruments
Businesses no longer have to assume the whole risk of any unforeseen event. There are several options and instruments available in the market to hedge the risks or transfer the risks either to insurance companies, reinsurance companies or any other through contracts before any unforeseen event occurs. These instruments can be insurance, bonds, reinsurance or any other. These instruments allow businesses to hedge or transfer the risks as per their requirements that they view as high risks for their businesses including cyber-attacks, operational asset failure, regulatory compliance, change in regulations and many others.