It is understood that the majority of business leaders comprehend the fact that in order for their respective organisations to generate revenues and profits, the organisation must take risks. After all, as the saying goes, No Risk No Reward. However, despite comprehending such concepts, they many still opt to disregard risk management processes because they fail to grasp and appreciate that such efforts and investment will in turn provide insights into their strategic planning.
Let’s be clear – many organisations in the private but also public sector may be keeping an eye on their financial risks (be it market, credit or liquidity) but is the vision of the Board of Directors or Governors envisaged and established merely on the financial aspects. What about all other risks (threats and opportunities alike) that emanate from the internal neighbouring quarters (departments) of the organisation as well as the external environment it operates in.
The shock that all businesses have gone through and are to this day still going through because of the COVID-19 pandemic and the war in Ukraine amongst other events prove that organisations are not immune to risks. Granted, the majority of organisations are not expected to cater for such “black swan” evens, even though the war in Ukraine was a slow build up and not an overnight event and therefore, some strategic planning could have been carried out.
Changes in regulations or guidance documents from authorities and regulators, trends in operations exposing the organisation to possible fraudulent activity, lack of appropriate and effective controls, inappropriate technical and organisation security measures, inexistent awareness and training, as well as other lacking mechanisms to ensure senior management and stakeholders have a good feel and pulse of the organisation’s risk exposure all fuel the inevitable. In other words, the strategic goals and objectives will not be achieved.
Having said that, a risk management framework is not a one-size-fits-all box within which all organisations need to adapt accordingly. It is a customisable process that would be aligned to the needs and exigencies of the business itself. Nevertheless, most medium-sized businesses should consider introducing that 2nd line of defence role/function.
At the same time, whilst Board of Directors are ultimately responsible for the overall risk management of the organisation, they would inherently require senior management to be fully onboard and aligned with their vision and mission. Concurrently, it is within a good risk management framework that would allow senior management to proactively and without unnecessary delay provide the right level of data and information in relation to the risks and opportunities that may impact the strategic direction and objectives of the organisation.
Ready to take a stance in safeguarding the future of your organisation? Drop us an email at [email protected] or [email protected] to learn how we can assist you in establishing your risk management framework.