This is why every business needs a risk management strategy in place, but not just any strategy. It has to be one that is in line with your business goals. Ideally, it should outline your entire risk landscape and point out the best way of dealing with risky situations. The more far-reaching the strategy is, the better you can protect the future of your business. All this trickles down to identifying the goals of your plan and working to achieve them.
Here is some information on the components of risk management and the goals you should look to achieve:
Components of Risk Management
A well-outlined risk management process comprises of three parts; risk assessment and analysis, risk treatment, and risk monitoring. The first step is risk assessment and analysis, whereby you will need to identify the risks that your business faces. You can use market research, experts’ advice, historical studies, or even brainstorming to understand your risk landscape.
Once you identify the risks that you face, the next step is to analyze them. You will need to create a risk matrix to quantify the impact of any threat to your business. Not only will this help to rank the risks in terms of severity, but it also helps to identify what risks need scarce resources more than the rest.
The second component is risk treatment, where you decide on how to handle risk. You can mitigate it, transfer it to a more able business, completely avoid it, or accept it. Your risk treatment decision should depend on the ability of your business and the impact and likelihood of a threat.
Lastly, you will need to monitor the risk from time to time. While your risk landscape might change with time, your business priorities might also change. Also, it is possible for new threats to arise as your business grows. Risk monitoring ensures that your risk management policies are updated enough to keep your business afloat in the current and future threat landscapes.
Goals of Risk Management
Everyone in your business needs to understand the risk management role they play in project management and the entire industry. For instance, compliance officers need to know that it is their role to limit non-compliance risks. With ill-defined risk management roles, it becomes pretty easy for business-critical procedures to go ignored, which increases the risk of business failure.
Tasks such as log monitoring, access control, market research, and even compliance all need to be governed by specific individuals in your business. The idea is to build a culture of accountability to reduce the chances of risk maiming your business.
Integrate Risk Management with Your Strategic Management Process
Your business’ strategy is poised for failure in case risk management is not part of it. As you plan out your strategy, you need to understand what risks the business faces and how to cater to them. For instance, the risk that a competitor might be gaining traction in the market can maim your business if you fail to address it soon.
Risk management should help establish KPIs that will not only help measure the success of your strategy but also create some consistency in daily operations. It also ensures that your business strategies are well-articulated throughout the organization to keep everyone informed on their roles. On the other hand, the integration of risk management and strategic planning makes sure that all who execute the plans do so with the risks involved at the back of their mind.
Monitor the Changing Risk Landscape
Business orientations, risk landscapes, and even risk treatment needs change with time. The risk treatment strategy you chose last month might not suffice today. For instance, you will need to look past the traditional anti-virus tools to cater to the threat that lies in file-less attacks.
Risk management is meant to identify these gaps and look for ways to eliminate them. Once you change your business objectives or notice new security problems, your risk analysis team should update the risk management plan accordingly. As a result, you will need to concentrate on both internal and external business factors to understand the changes in the risk landscape.
Offering Insights for Decision Making
When your entire business and the livelihoods of all employees are on the line, making business decisions blindly can no longer be acceptable. Executive managers need to understand the potential repercussions of any business decision. This should include how a decision will affect all stakeholders, including employees, investors, and customers.
Risk management helps to place critical business decisions under the microscope. A well-outlined plan shows business leaders the setbacks that their business faces off the bat and the best ways to deal with them.
While business threats will always be imminent, your risk management approach ensures that your business can come out of the other side of risk. Ideally, it requires seeking to understand the nitty-gritty details of a business threat and learning how to tone it down. The more detailed your risk management plan is, the easier it will be to keep your business afloat and to grow it.
Ken Lynch is an enterprise software startup veteran, who has always been fascinated about what drives workers to work and how to make work more engaging. Ken founded Reciprocity to pursue just that. He has propelled Reciprocity's success with this mission-based goal of engaging employees with the governance, risk, and compliance goals of their company in order to create more socially minded corporate citizens. Ken earned his BS in Computer Science and Electrical Engineering from MIT. Learn more at ReciprocityLabs.com.