Does your business have a comprehensive risk management strategy? These days risk management must respond to an environment of continual regulatory change and ever more demanding expectations.
It’s imperative for brands to develop world-class risk management strategies that identify and manage risk before it negatively impacts their business.
Risk Management. Operating in the New Normal.
Financial institutions continue to make progress in many areas of risk management. Boards of directors are devoting more time to risk management. Prevailing practice now includes having a chief risk officer position and an enterprise risk management program.
If your business is considering revamping their existing risk management strategy or you’re in need of creating one, below is a list of important steps to consider.
1. Appoint a Risk Management Council
Before you start developing a strategy, you must appoint a risk management council that will be responsible for reviewing, identifying, and managing loss exposures. This council should be comprised of employees within various departments in your company. They should all be aware of their role in the prevention of risk and be held accountable for making their teams aware of risk management best practices.
2. Conduct a Risk Assessment
Now that you’ve appointed a risk management council, you need to make a list of all the potential risks that could impact your business.
3. Prioritize Your List of Risks
After you’ve identified a list of risks, you need to perform a risk assessment to determine the likelihood that they will happen and the impact they would have on your business as a whole. Once you’ve done this, you can better prioritize risks into two columns—high-risks and low-risks.
4. Track and Monitor Risks
Now that you’ve identified and prioritized your risks, it’s time to track and monitor the risks. For example, a contractor with a satisfactory performance record to date could experience financial or operational difficulties that negatively impact that contractor’s ability to perform. For this reason, it’s important that you keep ahead of risks by continually monitoring things like your suppliers, competitors, and industry trends.
5. Regularly Evaluate Your Risk Management Plan
It’s important that you regularly evaluate and update your risk management plan every quarter. Ask yourself the following questions: Is there appropriate monitoring of the risk management process to ensure it continues to function properly? Are there adequate processes to ensure risks are appropriately identified? Are department heads doing a good job in informing their team of risks and how to prevent them?
The tidal wave of regulatory developments created by the global financial crisis shows no signs of abating, especially for large institutions. Surveys show that increasing regulatory requirements and expectations are extremely challenging for most institutions.
Thus, implementing a risk management strategy is more critical than ever before to your company’s success.