All businesses face a certain degree of risk, regardless of the economic climate. You will continually face potential internal and external factors that can thwart your best efforts to minimize, and ideally avoid risk. The good news is that, by building a proactive strategy that includes handing off important goal-tending responsibilities to respective members of your management team who are responsible for specific types of risk, you can bulk up your company’s risk management control.
What Types of Risk Factors Do You Need to Consider for Your Organization?
Before devising your Enterprise Risk Management (ERM) strategy, as a major component of your overall Information Security Management System (ISMS), it is important for you and your management team to sit down and consider the many different risks that can affect your business. The first step to preventing incurring these risks is to identify the different risk types that your organization faces.
Each company launches their business with a well-organized and solid business plan that defines its goals and strategies. However, business operations are rarely static; especially in the modern business world where competition in many markets is incredibly tight, prices for materials can skyrocket in a heartbeat, technology evolves and upgrades at breakneck paces, and customer preferences can change in an instant. You can avoid strategic risk by continually monitoring these factors and making necessary adaptations to avoid the danger of customer and profit losses.
Compliance risks involve staying on top of your industry’s specific legislation components, regulations, rules, and other bureaucratic standards, per Chron. Bodies like the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA) regularly deploy regulation updates to a range of different industries while the Health Insurance Portability and Accountability Act of 1996 (HIPAA) serves as an example of a complex and often-changing set of laws specific to one industry.
Operational risks are among the most difficult to predict and prevent since they are most often due to unexpected and sudden failures of people, equipment or processes. This internally-based risk stems from factors beyond your control, affecting your daily operations. As with most risks, though, it is important to do your best to do your best to foresee possible failures in various areas—by regularly communicating various potential risks with managers responsible for those areas—and create contingency strategies.
Most types of risk can result in some degree of financial risk, but there are a few risk variables that are specific to your organization’s financial health. The most direct way that your organization might incur financial risk is how it handles money. Financial risk considerations include your company’s debt load, customer credit extensions, and international business dealings.
Reputational and Client Trust Risk
Your company works hard to build and preserve a reputation based on client trust, so it is critical to avoid reputational and client trust risk. These types of risks include product defects and failures, lawsuits, poor customer service that results in negative public feedback, and data breaches that compromise confidential customer data.
Build a Strong Framework for Risk Management Success with a Detailed Game Plan
With so many potential risk factors, it may seem like a never-ending battle for your management team keep up, but knowing your foes gives you the best shot at defeating them.
Like any other facet of your business, effective risk management control starts by working with your management team to develop and design your organization’s shared vision, recommends KnowledgeLeader. While your company’s shared vision is often more aspirational, and even somewhat nebulous without a distinct plan of action, your risk management game plan involves defining concrete objectives, laid out in clear terms.
Enterprise Risk Management Development Is a Concerted Effort
Your management team will head up the primary and overriding phase of risk management control, overseeing and owning the various risks that run throughout your organization. Each management team, or management team member, will focus on a particular risk factor, relevant to their area, and work to monitor that risk and ensure compliance with risk management procedures.
By developing a coherent and consistent framework, methodology and language for your ERM, you will build a firm and effective foundation for risk management control.
Continually Monitor Risks and Maintain Compliance
Effective risk management control should be dynamic. Your ERM team needs to continually monitor the risks, as well as controls that you have set in place to maintain your organization’s shared vision. Some of the key factors of your ongoing ERM plan might include the following:
- Inform Staff of Their Responsibilities to Ensure Compliance.
- Monitor Business Trends, Financials, Data Management, and Regulatory Updates to Anticipate Risks.
- Change Activities Are Important.
- Conduct Internal Audits.
When everyone knows their specific role—and how their commitment to adherence to that role helps to avoid risk—they can better maintain compliance. The more that your entire organization works in tandem for your goals, the better.
Staying a step or two ahead of potential risks, when possible, can help you make detours for better outcomes.
The Poole College of Management asserts that board members should exercise judgment when considering changing risk profiles, but your organization’s ability to adapt is indeed important. Again, this is an area where informed input by your team members is crucial to making risk-averse changes with the best possible outcome.
Enlist the help of an auditing team with extensive ERM experience for a fresh and objective perspective on your organization’s risk management controls. Work with a firm that focuses on risk identification and understanding, risk acceptance and tolerance, and risk management and mitigation.
Put Your Risk Management Control Plan Into Action
Risk management control is certainly challenging, but with the right plan and a committed team, you can keep your company, as well as all other stakeholders, safe, satisfied and profitable.
If you need additional risk management strategy ideas, or help with your internal audit for ERM, I.S. Partners, LLC. is here to help. Contact our team by sending us a message or calling us at 215-675-1400 so we can talk about the various risks and what you can do to steer clear of them.