Risk is an anticipated occurrence in every organisational endeavour. Internal and external factors have the potential to negatively impact a business and the capacity to foresee it and act accordingly. This will mean a significant deal to the survival and even to the success of an organisation. It is so valuable that businesses invest a lot of money into maintaining a risk management system.
What is an Effective Risk Management System?
There are countless benefits to establishing an effective risk management system. Although it costs considerable monetary and some workforce investment, businesses understand that its benefits far outweighs its cost. An effective risk management system is able to do the following:
- Identification of Risk – This is the capacity to determine and anticipate what can possibly go wrong in the business process in consideration of internal and external factors.
- Analysis of Risk – Risks are inevitable in any organisations’ operations and risk management allows businesses to analyse the risk relative to how it can impact the businesses. This is where risks are categorised whether high or low depending on how they can impact the business.
- Controlling Risk – With the correct information of the risks involved, risk management also provides recommended actions on how to better deal with the risks. This is mostly on the prevention side which identifies possible actions to prevent anything wrong from happening.
- Treating Risk – In spite of identification, assessment, and control, some things really do happen and this is where risk treatment comes in. It provides solutions and steps on how to deal with the damage that’s been done.
Why Management Boards Need to Stay Informed?
Risk management must come with a standard communication protocol in order for it to become more effective. This communication protocol must include a constant provision of updates to management boards on everything that is related to the risks that affect the business. With management boards up to date with risk management information, considerable advantages can be taken from any situation.
1.Cohesive Risk Management Action
The most important part of risk management is the cohesive action of every part of the business that is concerned with the risks involved. It is only through the management boards that this cohesive action can be achieved and implemented. Through this cohesive action, the potential impact of risks can be reduced, if not totally eliminated.
2.Efficient Risk Management Implementation
Control and treatment of risks as recommended by a risk management system is only as good as their precise and calculated implementation. Management boards need to do the progress of certain risks so they can implement control and treatment effectively in an identified level within the organisation.
3.Save Time and Resources
The biggest advantage of an effective management system is that it enables an organisation to save valuable time and resources. And this is only possible if management boards are able to respond to the risks urgently. If they stay informed about things that might possibly go wrong in the business, they can act immediately which saves time and money in the long run. Having to deal with risks too late can cost the business a fortune, depending on the risk in question.
4.Protection of Assets
Management boards come up with the measures to deal with risks based on risk management information. They also lead its implementation. If they are constantly informed on the development involving risks in question, they can better establish and implement measures that can protect the company and its assets.
5.Protection of Human Resources
In some situations, the employees or manpower of the organisation are the ones at risk. These types of risks are not only physical, but also psychological and health risks. Management boards can then make decisions that better protect this human resource and make the organisation a safer and healthier place to work.
6.Reducing Legal Liability
Legal liabilities are huge concerns for organisations and board management needs to be in the know should such a risk arise. This way, they can make legal actions that can reduce the liability of the organisation by removing any causes, dealing with potential legal liability grounds, and other necessary procedures.
The goal of an effective risk management system is to uphold, protect, and support the business as it operates and grows. It is in the best interest of business owners to keep everyone concerned informed and up to date with risk management systems and information, and this definitely includes management boards.
Risk management also only becomes valuable when the right course of action is done in response to its assessments. An organisation can’t be too lenient nor too tight when it comes to risk management procedures. It should strike the right balance between underestimating and overestimating risks to better manage and protect its resources.
If you want to learn how cammsrisk can help your organisation’s board managers stay ahead of the curve, book a demo with us today!