Innateriskcultureissues

Organizations must have solid risk management disciplines, make objective assessments, develop a high-effective management framework, and make the smooth transition from risk mitigation to risk intelligence.

The ubiquity of information has provided both growth opportunities and increasing risks to organizations across industries. However, many companies are immature in the way they do their Strategic Risk assessment and management, enterprise risk management is blamed as a time wasting and unproductive exercise. 

Following are some of the important risk culture issues. It takes systematic understanding and planning upon enterprise strategic fit, consistency of direction from management, structural capability, risk intelligence to improve business effectiveness and maturity.

The management overly emphasizes on controlling, mitigation, rather than risk management and intelligence: Traditional approaches to managing risk tend to focus on monitoring leading financial indicators and keeping tabs on regulatory changes. That’s still an important exercise, but not sufficient to run a high performance organization facing “VUCA” new normal. To build a risk-aware culture and improve business risk management maturity, the leader with risk intelligence will integrate risk management into the enterprise’s core decision-making processes with the proactive risk management scenario and integrate GRC practices to improve business responsiveness and adaptability.

Often, risk and reward are proportional from innovation management perspective. The risk management needs to lift up from risk control to risk intelligence which can identify the potential business growth opportunities. The revenue leaders in cross-industrial sectors are the best practitioners for risk intelligence. They make a smooth shift from risk-avoidance to the risk management and risk intelligence mentality. They can't and won't be able to manage or predict every emerging event, but by mapping and measuring complex interactions in real-time can gain early warning, anticipatory awareness of possible/plausible negative impact.

Often a big risk is that the risk management system is detached from the real management of the business: As strategic risk management is a critical component of business strategy, a more mature organization will find it much easier to achieve the goal of implementing strategic risk management, whereas a less mature organization will obviously find it much harder. To improve risk management effectiveness across the organization, it’s important to embed risk identification and assessment in operational processes including project management, integrating the risk management system in the running of the operation, so that if the risk management system doesn't spot it, the business won't either.

People are the center of risk management. There are "human factors" such as irrational, cognitive, or behavioral aspects in risk management. If the management has put in place effective GRC processes for protecting business brand and reputation. It helps the management clarify what the brand stands for, how the company wants its stakeholders to see and perceive the brand name. The organization's brand equity is the key asset of concern when it comes to the question of reputational risk. When looking at the risk - control relationship, you need to remember that they are independent variables working together.

Silo-based risk management enlarges management gaps and causes long term concerns about business resilience: In business, every day is a risk, but when a company embarks on a growth strategy, the risk curve will always be greater than a “business as usual” approach. Critical uncertainties are the unknowns below the tip of the iceberg with utmost relevance for the organization or entity you're planning for. Risk management may require a lot more future vision as well as a strategic mindset, be cautious of the things that would prevent the execution of the strategy from achieving the stated aims or that would even make the strategy completely obsolete. It might be good to work with plans and assumptions and scenarios, as long as you keep in mind that these have been elaborated from past experiences and past knowledge. It’s important to integrate corporate risk management into strategy management, so conditions of known risk are amenable to constructing alternative scenarios and evaluating them; not only predict and prevent risks, but also identify opportunities for business growth and improve business maturity.

Integration of corporate risk management into organizational culture is another crucial aspect of running a risk intelligence organization. Meaningful enterprise risk management is as much about changing organizational culture as it is anything. All people must support it if they need to create risk management effectively in organizations, improve employees' awareness of short and long-term objectives and strategies; make clarity of individual accountability for business objectives and enhance employees' understanding of policies and risk. To develop an innovative organization, encourage calculated risk-taking, fail fast & forward, and learn from failures to innovate effectively.

With high velocity and hyper-connectivity, people and organizations are becoming more interdependent with each other. Organizations must have solid risk management disciplines, make objective assessments, develop a high-effective management framework, provide backup options, and make the smooth transition from risk mitigation to risk intelligence.

Posted in: Digital Pitfalls,GAPs,GRC