Wednesday, July 13, 2022

Uncoverrisklogic

You can't and won't be able to manage or predict every risk, but by clarifying the logic behind risk management, you can gain early warning with anticipatory awareness of possible negative impact on business management.


The “VUCA” reality brings both an abundance of business opportunities and numerous potential risks. Any business can be at risk for survival at any minute due to continuous fast-paced changes and continuous digital disruptions. In business, every day is a risk, companies that are stuck with their old ways are exposed to the risk of being rapidly disrupted. 

When a company embarks on a growth strategy, the risk curve will always be greater than a business as usual. It’s important to enhance risk management logic, enabling the business to shift from risk control to risk intelligence.

Risk management can be integrated into organizational culture, process to run a risk intelligent organization: Critical uncertainties are the unknowns below the tip of the iceberg with utmost relevance for the organization you're planning for. All people must support the risk management strategy if they need to create risk management effectively in organizations. The management needs to make necessary tradeoffs from diverse perspectives of stakeholders in the business and focus on your top strategic priorities at the moment. It’s also important to make tradeoffs on how they allocate resources scientifically based on their risk appetite and the degree of risk tolerance.

Do people need to be forced to comply with risk management activity or do they naturally consider it as part of their daily work? People factor is probably the least well-understood part of Risk Management, but the most challenging part to manage risks. To cultivate a culture of risks intelligence, all people in the organization need to have an awareness of emerging risks and opportunity; make clarity of individual accountability for business objectives and enhance employees' understanding of policies and risk. In essence, the underlying themes and balance in risk are centered around cultural and organizational transformation.

Build risk models which can effectively predict, optimize, and consider a continual and sustainable risk management approach with multi-faceted perspectives: Risk is part of business reality due to uncertainty, unpredictability, or unrepetitive circumstance. As long as risks have been identified and agreed with stakeholders as per business needs, then you can take place well-developed risk models and specific thresholds for justifying opportunities and business outcomes.

However, many organizations lack the ability to understand complex risk models, and also lack "trust" in the fit of models on the value chain level. Forward-look companies make a shift from risk control to risk intelligence. The question is how to build the trust and acceptance for predictive modeling which proved to be effective in improving risk management maturity. The top-performing companies implemented on average twice as many of the key risk management capabilities as those in the lowest-performing group, manage opportunities and risks cohesively and improve organizational level of business maturity smoothly.

Reputation management is an integral discipline of risk management:
Reputational risk is a consequence of the public and media reacting to all the other risks. Reputation management and brand protection become increasingly intertwined and crucial. Technically, reputation risk starts with the “do's and don'ts” of a single person in a certain context and in a certain situation. Reputational risk, client perception, competitor reaction, financial markets perception etc., all have a risk factor which needs to be recognized, and managed smoothly. The efforts on managing risk holistically or in a more integrated fashion are critical for the long run.

Brand Equity is the key asset of concern when it comes to the question of reputational risk. Always keep close monitoring of reputation management for transparency and analysis of potential long-term consequences. You can't and won't be able to manage or predict every risk, but by clarifying the logic behind risk management, mapping and measuring complex interactions in real-time, you can gain early warning with anticipatory awareness of possible negative impact on reputation management.

Assuming that in any risk management program, all the known and potential risks would have been covered and managed, and over a period of time, you are able to manage uncertainty and avoid the business pitfalls on the way. From a risk maturity perspective, high mature companies have on average implemented twice as many of the key risk management capabilities as those in the lowest-performing group to build risk management competency and improve organizational maturity.

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