The thrust is that almost all organisations are facing an onslaught of difficulties and wondering how they navigate the uncertainties.
Using risk management to prevent profit-damaging incidents
Risk management is a technique to gain success; translated it means “risk and reward”, the upside from achieving your corporate objectives.
Businesses that learn how to harness Risk Management will survive and thrive while many that don’t will face more difficulties and being overwhelmed by world events and changing work patterns.
Currently, major events in the world are increasing the threats to be countered against and outstripping the ability of organisations to adequately respond.
Prior to the pandemic, a handful of major events were large enough to have ripple effects on business performance on a global scale, for example, the Global Financial Crisis in 2008-2009. Universally, financial institutions stress-tested their risk scenarios to determine how much of a financial shock they faced and to find suitable solutions. Governments had to bail out banks and insurers who were ‘too big to fail’.
Compounding threats are here and now
There were smaller events localised to a region that also occurred, such as the Deep-Water Horizon oil spill which caused enormous pollution in the Gulf of Mexico. Another impact of it was the reduction of oil supply from that source, but the world had other sources of oil available to ameliorate the risk.
When the Covid-19 pandemic escalated and locked-down borders, climate change was already being recognised as the most significant threat to the existence of humankind. The Pandemic to some extent side-lined the fight against climate change, but everyone knew that support to counteract climate change was taking place.
Most continents are experiencing unusual weather patterns and associated disasters, attributed to the effects of climate change. Australia is a perfect carbon copy of this; major fires of scales never seen before in 2021 and major floods never seen before in 2022. Two major floods took place within four months of each other, putting to scorn the meaning of a 1:500-year flood event.
Most organisations are already ‘street-wise’, having some contingent reserves to draw on in the case of unexpected downtime or reduction in operations. However, current world events are impacting:
- Staff productivity due to the lingering pandemic and the transformation of the workplace from office-centric to a hybrid
- Increasing cyber-attacks and the need to invest in security
- Supply chains breakdowns or delays, local and global
- Rising inflation and potential flat-lining of the economy or even recession
- Transitioning economies to renewable energies
The imperative is to embed into your company operations the workings of risk management and governance that is so seamless, that the benefit-cost of having risk management supports and drives the strategic plan to have a better performance than would otherwise be the case.
Successful risk management is applied in business operations
From setting in place the right methodology for you, the Risk Management Function follows a Roadmap to implement a solution that is consistent with your business operations and simple to apply. Staff buy into the methodology, which makes sense.
The crux of successful risk management is that it is taken through a maturity pathway that enables staff to grow in managing risks.
The end-game of having risk management can be shown in this example. You have a set budget to allocate, in the context of managing IT assets or maintenance works, new business initiatives and ask, which of these will lower my risks the most for the least costs to pay?
By knowing the end-state of where you want to be in managing risks, you can work backwards to the present level of knowledge in your organisation, and chalk a pathway to deliberately increase risk management that adds value to your business outcomes.
