Prevention is better than cure. Those were the words of the German Poet, Johann Wolfgang von Goethe more than 200 years ago, but they remain fresh.
In a competitive business environment, organisations must manage risk to achieve business and strategic objectives. Unfortunately, many do not fully understand the risks they have assumed and whether they are monitored, managed and aligned with risk tolerance.
A solid risk management strategy can help your company plan for risks while also establishing how to deal with them. This saves time, money, unnecessary disruptions and safeguards the future.
While a company can’t predict the future, it can use the past to develop a risk plan that produces success.
Before identifying and assessing risk, it is important to get the basics right.
Your risk management plan ought to be part of daily operations to help in dealing with threats without delay.
While regulations and management priority historically drove risk management investments, you must consider additional pressures such as protection of market value, expectations of counterparties and associated risks, and demonstrating reasonable awareness and emerging risks. Even if resources may be tight, there are many benefits in dedicating more effort to risk management.
While there’s no single solution or approach to developing a plan, it hinges on procedure. Developing the correct processes can ultimately make the unmanageable, manageable.
Identify the risk. If you don’t know what risks you are facing, you can’t address them. But where do you start? Identifying risks can start with a brainstorming session that involves staff from all departments.
It’s important to look at current risks to figure out what is expected. Ranking of risks helps to address most pressing concerns, first.
As you work through the checklist, take the time to research areas you are less familiar with. Also identify risks using methods such as interviews, surveys and facilitated workshops, including emerging risks and events that might bring negative consequences.
Perform a risk assessment: This is how to rank cases, highlighting appropriate responses and where control adequacy is low, and monitoring.
Analysing risks can be difficult due to a lack of information, but a checklist can lessen the burden and help in understanding the whole matrix.
It’s critical to assess the cases and start addressing the most pressing ones classified as high, medium or low.
Assign responsibility to the priority list, ensuring there is someone who will manage and oversee the risks.
It’s a best practice to develop a risk management team consisting of both internal and, if applicable, external people.
Develop a strategy: If you identify any risks, planning can help you to address threats.
For each major risk identified, create a plan to mitigate it. Discuss with the risk management team and act collectively on how you will address it.
As these changes occur, it’s critical to update your plan so that you don’t lose sight of potential threats.
Using a risk culture, you should support risk management through executive communication and exhibit desired risk management behaviors.
Determine a risk appetite to no not only help your team in understanding the risks, but also align views before an incident occurs.
Reporting risks should also follow assessments and also integrate ERM into decision-making.
From the above, the adage of ‘prevention is better than cure’ can be seen.
Getting it right helps to solidify operations and give a competitive edge in the marketplace.