Risk management is not an isolated discipline, but an integral solution that improves business agility, intelligence, and maturity in a structural way.
Risk management requires a lot more future vision, a strategic mindset, and the management discipline: Lack of risk awareness creates more blind spots uncovered and gaps unfilled. As strategic risks perhaps cause fatal business failures; there’re a growing number of organizations shifting their risk management orientation from bottom-up to top-down, with more senior management and board involvement. It requires a clear vision, strategic thinking and strong management disciplines.
Strategic risk is knowingly assuming a risk that is worth the effort to predict, analyze, because it is believed that the potential reward outweighs the potential downside. However, if senior risk managers have to micromanage all risks, eventually, key risks or opportunities will not be managed effectively. The secret to risk management effectiveness is the degree to which delegation can be leveraged in improving risk intelligence.
For leading organizations, corporate risk management is already an integral competency: As financial performance is highly correlated with the level of integration and coordination across risk, control and compliance functions. The efforts on managing risk holistically or in a more integrated fashion are critical for the long run. Information is one of the most invaluable assets of the company. Information savvy organizations aren’t just increasing their focus on managing strategic risks; they are changing how they do it. They incorporate strategic risk management into their business strategy and planning processes to achieve high returns from risk investments.
The more diverse, the more regulated, the more geographically dispersed an organization becomes, the more important an integrated risk management approach becomes. Risk management can apply advanced analytics tools to increase business management effectiveness, improve controls around key processes and optimize risk portfolio. Risk management needs to get integrated; it is part of the culture and a management core competency.
Innovative risk management actually creates value by identifying opportunities to capitalize on uncertainty and volatility to maximize gains: There are many out there that simply don't understand, or appreciate the benefits of holistic risk and opportunity management to an organization. Some of your starting points of improving risk management will be defined by the level of risk and opportunity maturity already in the organization.
Holistic risk management indicates high reward and high risk proportionally. A more mature organization will find it much easier to achieve the goal of implementing holistic risk management for generating values, improving competitive positioning, and catalyzing innovation, whereas a less mature organization will obviously find it much harder.
Organizations must have solid risk management disciplines, make objective assessments of its effectiveness and efficiency. They should tailor their methodology and approach to manage various business risks effectively, and keep the organization intact by ensuring sustainability. Risk management is not an isolated discipline, but an integral solution that improves business agility, intelligence, and maturity in a structural way.
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