Running a business without developing an effective risk management approach would be like walking a tightrope without support.
How much would a business pay to see into the future? Risk management may not be a crystal ball, but when applied properly it helps you mitigate potential business problems.
For a lot of people, risk management conjures up images of boring workshops, unnecessary templates and words or phrases that are either complex or hold no true meaning in the real world, while someone insists on ‘working through the process’.
I have shared these thoughts and sat through such workshops. But why do people make risk management such a tedious experience?
When applied well, risk management provides a looking glass into the future. It helps to identify and assess potential problems that could have an impact on business outcomes. From a risk practitioner perspective, it does involve standards, processes, methodologies and templates, but these things help to provide consistency – a common playing field with a consistent language that provides a basis for management decisions.
By looking at sources of risks, potential outcomes and current controls, an evidence-based process helps you determine what you actually need to do about the risk (mitigate, transfer or accept).
When applied correctly, risk management will save you time, money and potentially rework. This is active management versus management by observation.
Effective risk management is fundamentally good business planning. It doesn’t really matter what you call the activity, the opportunity to understand potential impediments to achieving varying levels of success or outcomes can be worth significant value in terms of dollars and stakeholder confidence.
A textbook or YouTube clip can tell you how to theoretically complete a risk assessment, and it should involve some variation of a seven-step process derived from the risk management standard.
When you work with these standards, processes and methodologies on a regular basis, you find ways in which they can be applied with a high level of efficiency. Experience will help you determine where to spend a little extra time to extract additional information that could lead to better decisions for you and your business.
Good risk practitioners have a flexible approach that can be aligned with the context and operating environment of a business. They also listen, facilitate and provide guidance through the risk management process to provide tangible outcomes that add value rather than shelf ware.
What does this look like? Here’s an example you may be familiar with. Car manufacturers build cars with numerous safety features. Why? You may argue it is to save lives and build cars that meet industry standards. Well, yes. That’s certainly part of it. But have you considered how car manufacturers advertise their safety features and compliance with international safety standards to differentiate their products?
There have been some incredibly creative and emotive advertising campaigns to demonstrate how these features have been incorporated in vehicles. Risk management has been deliberately used as a tool to increase sales (think Volvo). In the airline industry, Qantas uses risk management as a competitive market differentiator on the basis of its safety record in marketing material.
Effective risk management is critical to any business that is attempting to achieve better outcomes for their customers, employees and stakeholders. As such, it should be a key component of every business strategy.
For more information about how to develop an effective risk management approach for your organisation, contact Cordelta today.
Annette Costello is a senior consultant and risk management specialist at Cordelta, a Canberra-based professional and management services firm.
This is a sponsored article, though all opinions are the author’s own. For more information on paid content, see our sponsored content policy.
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