In a recent risk management survey by Aon Global Risk Consulting, organizations cited 50 concerns that are “keeping them awake at night.” The top three are: the economy, regulations, and competition.
While risk is something for which many organizations prepare; in today’s interconnected world, it is hard to only focus on individual organizational risk. This is because risks affecting one organization are not always isolated to that organization. Corporations (and countries) can no longer function as islands or enjoy immunity from risks affecting others. Look at the economy, for instance.
In 2009, the problems in the small country of Greece were not confined to its borders. It disrupted markets worldwide; its problems spilling to Ireland, Portugal, Spain, Italy, Cyprus, and others.
And even before the Greece crisis, the United States was dealing with its own economic woes in 2008—its mortgage issues were felt by many organizations around the country and around the globe.
On top of economic struggles and perhaps because of them, governments have taken on more power in terms of regulating both government and business. This includes not only the financial sector, but all industries. New and changing regulations are a risk for corporations—the need is to adapt processes quickly to ensure regulators are happy.
The third risk, competition, is forcing big players to innovate and differentiate to survive the competitive onslaught. While survival is the stopgap; thriving is the goal.
Do you remember the “Super Size Me” documentaries? They forced McDonald’s to offer healthier meal choices on its menu. It was a matter of brand reputation (which ranks number 4 on the list of 50 risks). As McDonald’s was dragged through the documentaries, other fast food chains took note and followed quickly to update their menus. None of them wanted to be linked with obesity and poor health.
While most risks can be managed efficiently by organizations that proactively practice continuous improvement, those that scramble to react to crises are doomed to fall further behind. Think about business interruption, for example.
Major and natural disasters may impact whole communities, but smaller disasters can also wreak havoc. And we rarely hear about the smaller disasters. What happens if your library’s basement gets flooded? Do you have a contingency plan to salvage your information? Have you practiced the plan? What about if your computer system crashes? How will this impact your business?
Business interruption, if it occurs, does not need to occur for prolonged periods of time if the organization is ready to deal with anything. Lean organizations that practice efficiency in all processes are more agile to address small or large disasters. Bloated organizations can never be as ready to handle the problems nor are they able to quickly recover from disasters.
To be highly efficient and effective, here are four considerations:
Implement and maintain a continuous improvement strategy so that your organization is ready to handle any risk at any time.
Ensure that organizational policies and procedures are current. Test them to make sure they make sense and that they will enable productivity, especially in the face of risk.
Train and re-train all staff, so that they understand policies, procedures, and their individual roles and responsibilities in the organization.
Develop an organization-wide culture that includes efficiency, effectiveness, and productivity. This starts with leaders championing the culture shift and then practicing the change. Lead by example.
Organizations that plan for the future by incorporating a continuous cycle of efficient and effective practices will thrive even when faced with adversity. Those that do not have a healthy risk management strategy may not survive.