It’s Risky to Ignore Risk

Identifying, assessing and managing risk are the responsibility of the board and the senior leaders of the organization. Risk management isn’t just a nice-to-have. It’s invaluable for protecting your business. 

However, many ignore this important duty. Why?

Sometimes they don’t think risk will impact them enough to do the work for managing risk. Others don’t know what steps to take to reduce risk - they don’t have a clear structure and process to follow. Others don’t see risks in the daily tasks.

Whatever their reasons for ignoring risk, it’s time to start managing it.

Why now?

1. Increased legal liabilities for not managing risk properly
2. More involved in high-risk activities
3. Updated international standards

What are the potential consequences of ignoring risk management?

1. Lawsuits – Of course this has to be the first problem. Part of managing risk involves making sure your entire organization follows all laws and regulations and minimizes legal exposure.
2. Calamitous losses – Including risk management in your strategic planning process helps mitigate losses – including financial, market share, data loss and customer confidence. You could suffer irreparable damage by failing to manage risks appropriately. A recent Deloittes study showed that 73% of root causes for dramatic loss were derived from strategic risks and only 10% from operational risk.
3. Lack of business continuity – If you fail to understand and manage risk your company may fail to thrive or even disappear from the marketplace.

What can you do?

1. Include risk management in your strategic planning process. They shouldn’t be separate processes, but one integrated process to ensure the organization takes the appropriate steps to reduce risk and meet their strategic goals. Ensure your vision, mission and strategies align with the risk profile of your organization. Use a Systems Thinking Approach to seeing how risk and strategy are linked. 
2. Assess risk appetite in your organization and set metrics accordingly.
3. Be deliberate about including risk and measurement in communications with staff and other key stakeholders.
4. Ensure discussions include all possible perspectives. Reward people for questioning conclusions. Group think and overconfidence bias often causes the organization to take on excess risk.  
5. Create systemic processes for assessing, managing, reporting, monitoring and reviewing the impact of risk.

Contact me at Valerie.MacLeod@HainesCentre.com if you’d like to include risk management in your strategic planning & implementation process.