Every organization develops strategic goals that ensures success and profitability. They also have to implement risk management to eliminate all the uncertainties and challenges that hinders progress. The goal of risk management is to identify possible risks and to determine the resources to allocate in making sure these critical risks are addressed. Risk management is no more a choice for any business. It is a needed function and a core competency of any business to survive.
Risk management helps to manage risk cost-effectively as they emerge instead of trying to fix the issues after they have occurred. Business schools have indicated that 99% of organization’s risks can be proactively managed prior to occurrence.
Here are the main reasons for effective risk management implementation:
1. Organization’s success
Effective risk management helps to realize enterprise value. It is a core competency for the organization that requires staff to be trained well with the proper risk identification and problem-solving techniques.
2. Tailored risk management strategy
Tailoring the risk management strategy to work for individual organizations is key to success. Risk management strategy is not a one-size-fits-all type of strategy. This is because every organization has a different culture, work environment and business objective. When taking a risk management training program, candidates are made aware of how risk management strategies work for their specific operations.
3. Continuous improvement
Risk management is not only focused on the negative issues that the organization will face. Risk management is needed for organizations to achieve goals and strategic objectives. It concentrates on ensuring continuous improvements in strategy, business processes, management approach and keeping businesses healthy.
4. Business performance
With risk management capabilities and techniques, organizations are proactive with improving business performance. Organizations implement a risk management framework that focuses on the identification of risks and formulation on a risk response strategy.
When training in risk management or developing this competency, organizations are equipped with a solid risk management policy and framework. They establish clear oversight and governance. They also develop a roadmap for successful implementation.
5. Relationship between risk and business
Setting a risk management framework will help in understanding the relationship between risk and business strategy. The framework will help to closely monitor business performance by identifying issues that are affecting performance and developing strategies to address the issues before the risk occurs. By monitoring the risk, an organization is prioritizing efforts to tackle and minimize the impact of risk on their organization’s progress.
A deep understanding of risk management can give any executive strong confidence on how to navigate a business even when faced with difficult risks. Executives that are trained in risk management are fearless of risks and more capable to find solutions for business continuity. It is important that management and teams have the right tools and capabilities to respond appropriately to unforeseen risks.
7. Valuable insights and fewer surprises
With a risk management plan in place, organizations are well prepared and know what to expect as they move forward to achieve their business goals. Organizations are being proactive that is contributing to their competitive advantage and fueling business growth. There are no surprises. Instead they realize business insights that were not obvious before.
8. Integral part of overall business strategy
Risk thinking is applied to everyday tasks, activities and decision-making. It is no longer a separate function. Risk management cannot be performed in isolation. It is an integral part of the organization’s approach. Organizations today are implementing preventive risk identification programs because they know that risk management is an enterprise-wide approach. This will help to avoid unexpected events and create greater business value.