While Kodak once commanded 85% of the camera production market share in 1976, its effects in the market today is borderline negligible. This drop-in glory comes down to one single issue, the failure of the business leaders to have a well-defined risk management program. In a perfect world, they would have accounted for the risk that the rise of digital cameras posed to the existence of their business and looked to capitalize on it.
This is why it is essential for your business to have a risk management strategy, but having a plan isn’t always synonymous to success. A great strategy needs to be in line with your business goals. It should point out the various aspects of your risk landscape and help you in deciding the best way to tone down business threats. The more detailed the strategy is, the easier it becomes to fortify the success of your business. All this depends on how well you can outline your risk management goals and the effort you put towards achieving them.
Here is more about risk management components and the goals you need to commit to:
Elements of Risk Management
Ideally, a robust risk management process comprises three parts, which include risk analysis and assessment, the treatment of risk, and monitoring the risk outcomes. Under risk assessment and analytics, you will need to figure out the risks your business faces. You can work with experts or use market research, historical studies, and even brainstorm to identify the risks that you might face.
Once you have a list of your business threats, it should become easy to analyze them. You will need to form a risk matrix to help tell the magnitude of the different business threats. Not only will this streamline ranking them, but it will also increase the efficiency in which you can use your scarce resources to limit their impact.
Secondly, you will need to pick a risk treatment option. You can opt to avoid the risk, accept it, transfer it to more able businesses, or even mitigate it. The choice trickles down to the impact and likelihood of risk occurrence and your business’ capacity in handling the risk.
Lastly, you will need to monitor the outcomes of your risk treatment options. While some choices might not have been the best, your business inclinations towards risk might change with time. On the other hand, it can be possible for new threats to arise as you scale your business. Monitoring your risk management program will help keep your business running both in the face of present and future business threats.
Goals of Risk Management
In project management and your daily business operations, everyone needs to understand the role they play in keeping your business risk profile healthy. Case in point, members of the compliance department, need to be on their toes to prevent non-compliance business risks. If you run your business without defining the risk management roles, business-critical operations can be overlooked- which can easily result in business failure.
Ideally, you should ensure that tasks such as log monitoring, market research, access control, and even compliance have specific employees who are in charge of them. The trick lies in fostering an accountability culture to protect your business from the wrath of risk occurrence.
Integrate Strategic Management and Risk Management
A well-thought-of strategic plan is poised for failure as long as you ignore the various risks that come with the plan. For the best results, you need to make strategic plans with the risks involved in mind and an idea of how to tone them down. For instance, the adverse effects that can come from a competitor gunning for your market share should be dealt with fast.
Ideally, you need to establish KPIs for both measuring the success of your strategic plan and inducing some consistency into your business’s daily operations. Also, everyone in the organization needs to be aware of the role they plan in the achievement of the strategy. When attending to their roles, everyone should consider the risk involved.
Monitoring and Updating the Risk Management Decisions
Nothing is ever set in stone, and your business orientations, risk treatment needs, and the risk landscape are bound to change. In most cases, it might not be feasible to use your previous risk management strategy today. For instance, using traditional antiviruses might not suffice when it comes to dealing with the current day threats brought by file-less attacks.
A complete risk management program should identify any downsides to your current risk treatment decisions and look to change them. The updates to your risk management design should happen as soon as you notice any loopholes. As such, your risk management team needs to pay attention to both the internal and external factors to truly spot any changes in the risk profile.
Drawing Insights for Decision Making
The decisions you make as a business put the livelihood of your employees and your entire business on the line, which is why you can never make them blindly. Every business executive needs to understand the repercussions a decision will pose to their business, employees, customers, and even investors.
Risk management acts like a microscope for these decisions by pointing out any loopholes. The plan should portray the risks the business faces and offer these executives options for treating them.
Risk is inevitable when building a business empire, but how you deal with it matters. You need to both grasp the depth of a business threat, what it’s potential effect on the business may be and how to mitigate it. The more far-reaching you can make your risk management plan, the brighter the future of your business becomes.