Why Risk Management Matters
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Amusement parks are full of thrill seekers. If you flag any park guest down and ask them where you can take some risks and get excited, they’re likely to point you toward some fast, tall behemoth of a rollercoaster.
However, we all know that the real reason rollercoasters can be so explosive is that they are rigorously maintained and assessed for any actual risks. Your company is the same.
While taking risks and finding innovative ways forward is important to keeping your team relevant and competitive, pinpointing any issues and preventing disaster can’t be ignored. Digital Transformation is key to this process, proven by the fact that 72% of risk executives are focused on making it happen.
Using data and vigilance, your company can take calculated risks and blast off toward more thrills than ever before.
What Is Risk Management
Risk management is a system designed to identify, assess, and limit any potential risks that could threaten a company’s operations. It’s used to anticipate the kinds of events that can cause financial losses or harm people in some way.
Risk management is often seen as an insurance policy for your business. You don’t want to be caught off guard by any unforeseen issues, so having processes and procedures in place can help you prepare for the worst without it actually happening.
Not all risks are created equal. It’s important that as you design a risk management strategy, you keep all three types of risk in focus.
Type One: Preventable Risks
Any risk that comes from within the business and could have been controlled should be avoided altogether. This includes any illegal, unauthorized, or inappropriate behaviors from team members and management.
A failure of the operational processes is also considered a preventable risk. Being active in your prevention methods is the best way to tackle these head-on.
Type Two: Strategy Risks
These risks are related to the business strategy and include anything from decisions made about expanding into a new market or investing in specific projects. They are required for the growth of your company, so instead of avoiding them, you need to find ways to anticipate them.
Any decision that comes with an element of risk should be made with a full understanding of what could happen. This is where data-driven decision-making comes in handy.
Type Three: External Risks
Risks that come from outside the business, such as natural disasters or market changes, are external risks. These can be hard to predict and prepare for, but having a plan in place can help you respond quickly and appropriately.
Benefits of Risk Management
The implementation of a risk management system can help your business in many ways.
Prevention - If you can identify risks early on, you may be able to prevent them from occurring at all.
Control - When an issue does arise, you will have total control over minimizing its impact and limiting potential losses.
Strategy - Risk management can help you develop strategies that will give your business an edge over the competition.
Savings - By identifying risks early on, you may be able to save money in the long run by avoiding costly mistakes or accidents.
Improvements - As you assess your company for risks, you may notice inefficiencies that could be improved upon.
Trust - Having a robust risk management strategy in place signals to stakeholders and customers that you are responsible and take the safety of the company seriously.
With these benefits in mind, it’s easy to see why implementing a risk management system is so important for any business.
Challenges of Risk Management
It’s important to understand that risk management is a complex process. It requires knowledge, dedication, and constant monitoring.
Time - Risk management can be time-consuming if you don’t have the right systems in place.
Cost - Implementing a risk management system may require additional costs for training or software.
Compliance - In certain industries, there are strict regulations on how risks must be managed and documented.
Communication - Risk management requires clear and constant communication between departments and stakeholders.
These challenges will be different for every company and may change throughout the entire data lifecycle. Constant vigilance is required to stay ahead of the curve.
How To Implement Data-driven Risk Management Process
While risk management has huge benefits, it can be hard to begin. With the right strategies and tools in place, you can create an efficient system that will help you identify and manage risks quickly and effectively.
Step One: Identify Risks
This should be a part of your data governance strategy. As you plan out how your company will use the data at its disposal to drive innovation, you should be aware of any and all potential risks involved.
Take a step back and examine closely how your business is being run at the moment. Are you taking any undue risks? What might become an issue if left unattended? Are things running as smoothly as they could be?
All these questions will help you and your team build an awareness of where risks lie, which allows you to get specific about if they’re worth having.
Step Two: Analysis
With all the risks you’ve uncovered, it’s time to start ranking them in order of importance. Consider how likely they are, as well as how intense the consequences might become.
By looking at the risk from a variety of angles, you can gain an understanding as to which ones should take priority. This way, your team can focus on addressing the most pressing issues first and foremost.
Step Three: Action Plans
Once you have an idea where your greatest risks lie, it’s time to start coming up with solutions. This should involve both short-term and long-term action plans that aim to mitigate any potential threats while also increasing your organization’s overall resilience.
You may need to create customized solutions for each risk, but it can be helpful to look at what other organizations are doing in similar situations as well – after all, no two businesses are exactly alike.
Step Four: Implementation
At this point, you’ve done the research and come up with a plan of attack – now it’s time to put everything into motion. Make sure your team is aware of the changes that are being made and how they can best help ensure their success.
You may need to adjust certain processes or invest in new technology, but these investments will be worth it if they help reduce any long-term risks. Keep everyone in the loop as well so that everyone is on board with implementing risk management strategies.
Step Five: Monitoring & Evaluation
Once your risk management process is in place, it’s important to monitor how effective it is and make adjustments as needed. Make sure you have the right data available so that you can track the effectiveness of each strategy.
You should also regularly evaluate your strategies and their results to see if any changes need to be made or new processes implemented. This will help ensure that you are always up-to-date with the latest trends and techniques for mitigating risks.
Best Practices for Risk Management
Getting the most out of your risk management strategy takes time, but you can follow these tips to start on the right foot.
Tip One: Involve Different Teams
Involve different teams and departments to ensure that everyone has a say in how risks are managed. This will increase collaboration and make sure that the best idea is heard. Make sure you have a way to collect everyone’s ideas and analyze them.
Tip Two: Utilize Technology
Technology can help you quickly analyze data, identify potential risks, and implement strategies for mitigating them. Software like Stormboard helps you utilize all the data coming in, and keeps everyone informed and involved in the process.
Tip Three: Develop Effective Communication Channels
Develop effective communication channels so that your team can collaborate on issues related to risk management. This will help ensure that any changes or updates are communicated efficiently throughout the organization.
Conclusion
Even the scariest of rollercoasters have countless safeguards in place to prevent undue risk. As your company evolves and grows, the same principle applies - make sure you incorporate risk management into your operational planning.
With planning and the right tools at your disposal, you can enjoy the thrills and spills of business success while keeping your teams safe.
Stormboard is leveraged by teams worldwide for everything from Agile PI Planning Events and Affinity Mapping to Blog Outlining and Brainstorming - taking advantage of our industry-agnostic, data-first collaboration platform can help you gather data, analyze it, action it, and report on your Risk Management Strategy - regardless whether it’s a brand-new process or a well-defined system within your business.
Get in touch with one of our experts today to learn more about where we fit into your Risk Management plans.
About the author:
A programmer by trade, Nick Saraev is a freelance writer and entrepreneur with a penchant for helping people excel in their careers. He's been featured on Popular Mechanics & Apple News, and has founded several successful companies in e-commerce, marketing, and artificial intelligence. When he's not working on his latest project, you can find him hiking or painting.
