Michael WellesManaging Director| EdWel Project and Risk Management TrainingChicago, Il, United States
If the most sophisticated financial companies are prone to failure can regular businesses guard against a similar downfall?
The answer to minimizing risk exposure for businesses is to not ignore it. Everything is a risk... customer relationships, financial controls, back office operations, and product development practices could all pose problems for an organization. Sure business should worry about disasters (like Hurricane Ike or this credit crisis), but sometimes too much emphasis is put on these ‘sky-is-falling scenarios’. Instead, business must focus some attention on the day-to-day risks that cause ‘death by a thousand cuts’. These operational risks slowly erode your competitiveness, and leave you in the same spot as a disaster.
With a disciplined approach to operational risk management any business can understand the risks that lie just beneath the surface and develop a layer of protection from their own “’Black Mondays’. The key rests in recognizing the pervasiveness of risk – and watch out for those risk triggers that hint at where things stand.
Every company can take these steps to minimize risk:
1. Review existing risk policies. Do the policies stop at disaster recovery or do standards exist to manage the dynamic nature of day-to-day business risks?
2. Assess your company's attitude toward risk: Is your company a risk averse culture or does it live by the mantra - the greater the risk the greater the reward? How do your risk practices fit with this attitude toward risk?
3. Use new technologies to your advantage: Automated risk assessment and forecasting tools exist that can get you beyond ‘just trusting your instincts’.
4. Change the culture: The long-term goal should be to get every employee involved in managing risks. Developing a common risk language among the employees and training a disciplined approach to risk management prevents minor risks from morphing into disastrous challenges.
