The Benefits of Addressing Risk – What Does Your Risk Assessment Process Tell You?
If there’s one thing we can be certain of it’s that today’s business world is constantly changing—it’s unpredictable, volatile, and seems to become more complex every day. By its very nature, it is fraught with risk.
Historically, businesses have viewed risk as a necessary evil that should be minimised or mitigated whenever possible. In recent years, increased regulatory requirements have forced businesses to spend significant amounts of money, time and other resources to address risk, and shareholders in turn have begun to scrutinise whether businesses have the right controls in place. The increased demand for transparency around risk has not always been met or met in a timely manner, however—as evidenced by the financial market crisis, where the poor quality of underlying assets significantly impacted the value of investments. In the current global economic environment, identifying, managing, and exploiting risk across an organisation has become increasingly important to the success and longevity of any business.
Assessing risks and what they could mean for you
Risk assessment provides a mechanism for identifying which risks represent opportunities and which represent potential pitfalls. Done right, a risk assessment gives organisations a clear view of variables to which they may be exposed, whether internal or external, retrospective or forward-looking.
A good assessment is anchored in the organisation’s defined risk appetite and tolerance, and provides a basis for determining risk responses. A robust risk assessment process, applied consistently throughout the organisation, empowers management to better identify, evaluate, and exploit the right risks for their business, all while maintaining the appropriate controls to ensure effective and efficient operations and regulatory compliance.
For risk assessments to yield meaningful results, certain key principles must be considered. A risk assessment should begin and end with specific business objectives that are anchored in key value drivers. These objectives provide the basis for measuring the impact and probability of risk ratings.
Governance over the assessment process should be clearly established to foster a holistic approach and a portfolio view—one that best facilitates responses based on risk ratings and the organisation’s overall risk appetite and tolerance.
Finally, capturing leading indicators enhances the ability to anticipate possible risks and opportunities before they materialise. With these foundational principles in mind, the risk assessment process can be periodically refreshed to deliver the best possible insights.
Organisations that vigorously interpret the results of their risk assessment process set a foundation for establishing an effective enterprise risk management (ERM) program and are better positioned to capitalise on opportunities as they arise.
In the long run, this capability will help steer a business toward measurable, lasting success in today’s ever-changing business environment.
CAL Corporate offers a wide range of workshops and online video programs addressing organisational risk and project risk management as well as other key issues in organisational and Project Management.