Today, the common challenges to effectively perform risk assessments are nearly identical in almost every organization, but the approaches applied to detect and avert these challenges remain unique to each. Sincere, attentive, and genuine evaluation of risks faced by an enterprise/business segment enables apt identification of imminent threats. Such risk assessment processes perform as an offensive discipline to help create a potent risk mitigation framework and efficient implementation of such risk-adjusted strategy will build a competitive advantage.
However, risk assessment administered through poor principles will land enterprises in potentially disastrous outcomes. It is ignorant to calculate direct financial losses as the only impact of a visibly adverse incident as caused by risk assessment failure. Examining the immediate financial downfall as the sole casualty echoes a large approach gap on the affected business’ end. It demonstrates the failure to utilize a strategy that represents opportunities, in reality.
An assiduous risk assessment process serves these opportunities:
– Avoiding unprofitable risks
– Detecting potential problems in its rudimentary stage and
– Employing risk occurrences for gaining long-term business benefits via innovation & growth
While organizations all over recognize potent risk assessment approaches as essential to sustain and ensure prolonged profitable performance, many are acutely happy with limiting risk assessment responsibility to simply ticking checkboxes.
In contrast, while past failed stories over the decade point at the absence of cautious risk management models in businesses, the challenges to maintaining efficient risk management hold equally true. These are common challenges across industries, albeit varying in intensity according to their type, size, and culture. The challenges include:
Risk assessment is seen as a blockage to daily business activities: Despite enterprises recognizing risk evaluation as critical, its acceptance still largely remains academic. Many businesses renounce/postpone risk assessment, favoring usual business tasks while viewing related practices as generating limited to no value.
Organizations themselves struggle with the process: Among organizations/enterprises prepared to adopt risk assessment, the majority get wrapped up in the process, rarely having a fruitful completion. This is often a result of rushing in on risk assessment completed for regulatory purposes – an approach that defies regulatory requirements invites hefty penalties and exposes the enterprise/organization to various vulnerabilities.
Data interpretation for acquiring actionable insights is a lot tougher: Information exists and gets generated rather quickly. While processing and organizing these large data to perceive risks is tough, interpretation of the data can be a difficult task for organizations and even large corporations.
Risk assessment data doesn’t precisely reveal existing reality: The scenario above further intensifies as a means to accumulate necessary information turns out faulty. Organizations often use inappropriate tools like surveys – these traditional ways prove to hide real vulnerabilities, thus, resulting in faulty risk assessment.
Implementing risk evaluation outcome isn’t prioritized: As discussed earlier in the four steps, inherent flaw realization combined with the lack of accountability can lead to muted implementation.
Challenges abound, but remedies and opportunities flourish as well. The thing required is the technical assistance and a well-intentioned modification of perception. It’s time for enterprises to perceive risk assessment as an integral discipline that builds and contributes to sustaining business performance within a risk-intensive world.
Creating a cozy risk culture where employees and stakeholders participate in open discussions about risks can instantly secure organizations from ever-evolving threats. This particular step can be achieved by organizing in-person informal interviews. One can create accountability by establishing voluntary participation and ardently implementing risk findings with clear expertise that risk assessment is a backbone for an effective ERM program.
The incompetent risk assessment that results in ineffective strategies has accounted for the majority of large economic losses ever experienced in corporate history. Typically, enterprises suffer as they fail in creating a solid risk assessment business case because of defensive strategy.
However, certain businesses/enterprises have adopted effective and clear methods without over-controlling risk. They convert challenges to opportunities, realize the value of uniting commitment & execution within risk management, and accept the precise amount of risk for pursuing their goals and remaining profitable.