When it comes to risk management, there is no one-size-fits-all solution. The effort and resources necessary to create the right risk management system can be overwhelming. However, the benefits of a successful risk management system can never be understated, no matter how big or how small the organisation may be. A well planned risk management system can yield huge benefits and help the company avoid or reduce potential threats.
Benefits of Successful Risk Management
Successful risk management systems can save organisations considerable damage that could have been otherwise reduced or prevented in the first instance. It protects the people, assets, and operations of every department so that the whole organisation runs as it should and experiences growth over time.
In addition, it safeguards the organisation from legal liability that could come at considerable cost financially and or affect the integrity of the company. It can also preserve the organisation’s relationship with its network and clients.
Keys to Successful Risk Management
Several factors need to be considered for a risk management system to be successful:
1. Taking Risk Management Discipline Seriously
Taking the risk management discipline seriously means being dedicated to dealing with risks at all levels of the organisation – from the top to the bottom. Senior executives need to acknowledge the importance of risk management and channels should be established to continuously communicate risk.
The integrity of the risk management discipline within the organisation must be preserved. To do this, a risk system should not be an afterthought, it must be integrated within the organisation’s overall business strategy and objectives and they should also be tied to performance.
Limiting risk management to compliance activity only fails to harness the ultimate benefits that the practice offers.
2. Effective Board Risk Oversight
The board’s role in risk management is highly significant. However, these roles need to be defined to be effective. Having a clear set of roles to be performed by board members, especially on risk oversight, will paint a clearer picture of the risk approach that your organisation will take. Similarly, the board needs to have a clear understanding of the details of risk management strategies that the organisation uses to ensure their decisions are coherent to those of risk management professionals.
3. Strategic Risk Positioning
This defines the placing of risk management professionals within the organisational structure and hierarchy. While there is no fixed formula to this due to unique risks, risk appetites, and other relevant factors for every organisation, it must be strategic enough to allow the fluid processing of risk management initiatives. This strategic positioning also enables the easy flow of communication between risk managers, executive administrators, board directors and departmental managers all the way to the bottom of the organisational structure.
Effective risk positioning will help an organisation save time and resources utilised in risk management practices. Ultimately, this shows the business’ gravity in dealing with organisational risks.
4. Sturdy Risk Culture
The treatment of risk information and a risk management approach, from the top to the bottom of the organisation chart ensures successful risk management. This means that risk management is not considered lightly or occasionally but it is recognised as an important department essential in decision-making.
Similarly, this means that every part of the supervisory level understands their roles and accountabilities when it comes to risk management. They must be trained to consider the advice given by risk managers and are effectively capable of handling risk information and implement approaches.
Apart from effective risk management approaches, a successful risk management incorporates an incentive program in effective risk strategy implementations. Incentives are an effective way for performance and talent management to encourage proactive behaviour towards risk. The saying, “what gets rewarded gets done” is actually true in many organisations.
Incentives may vary, but they should be strategised to ensure they motivate people and that they appeal to your manpower.
With these important factors in place, you can assure that whichever your risk management approach may be, it will be effective. Establishing and maintaining these factors within the organisation will further strengthen your risk management in the long run. More importantly, it will make your organisation successful not only in the area of risk management but also across many other areas within the organisation.
To find out how cammsrisk can further help with your risk management approach, book a demo with us today!