Efficient risk assessment has always represented a type of challenge that businesses are seldom comfortable admitting it. Surprisingly, the denials permeate corporate boardrooms and management meetings in mid-tier organizations, while young businesses are too often happy to deem themselves out of any such purview. These could just be considered as individual examples of a much larger issue. And consequences have manifested in more ways than enterprises would have ever anticipated.
The recent global economic meltdown and adverse risk events ranging from infrastructure damage to chemical casualty to financial data breach since the turn of the century represent failure to efficiently assess risks. A considerable count of companies continues to be complacent with regard to potential risks and vulnerabilities. While this complacency can be largely attributed to cognitive bias existing in boardrooms, the lack of immediately perceptible financial gains makes the endeavor of risk assessment tricky enough to dissuade businesses from adhering to established risk assessment practices.
Common challenges to an effective risk assessment do exist, but so do opportunities, which, leveraged well, can have a significant bearing on the way a company performs in times ahead. While the opportunities hidden underneath risk assessment methodologies do not directly add digits to the balance sheet, they ultimately contribute by making the company resilient to avert impending threats.
Barriers to efficient risk assessment do not deter successful organizations from devising out effective strategies which are executed equally well to arrive at risk-informed decision making. Overcoming the common obstacles to efficient risk assessment involves the following:
A simple and clear yet effective risk approach: Organizations often seek to shun risk assessment because their perceptions about the discipline are usually blurred by the complexities attached to it by them. Problems compound when businesses think that a simple strategy may not mitigate risks in the desired manner. This approach is aided by a mistaken belief that the assessment of potential scenarios cannot avert risk events. On the other hand, booming businesses adopt a simple strategy, and follow it religiously to identify risks. It is complemented by efficient execution of reasonably practical measures to mitigate risks in a way that does not impact performance.
Technological Assistance: With the ongoing business innovation, threats and risks too have acquired newer proportions. Obviously, the traditional tools of risk assessment are insufficient to counter dynamic risks. Thankfully, technology exists and is evolving at an unprecedented rate. A dependable risk assessment software enhances proficiency by providing crucial information to arrive at the best decision. Technological assistance from a preferred partner ensures that the solution is cost-effective and less time intensive, enabling enterprises to spend time on business development and to meet regulatory requirements.
Efficient manpower inspired by organizational risk culture: In risk assessment decision implementation, the lack of a risk culture stalls the progress in more ways than the dearth of skill does. Admirable risk culture originates in boardrooms and touches employees of all levels, which makes the company alert at sensing any impending threats. The vigilance is accelerated by accomplishing assigned day-to-day activities diligently. Such practices contribute to putting risk management into practice by creating an environment conducive for skilled resources to ensure that the necessary tools are used and managed adequately.
Achieving compliance is the natural outcome not the enforced goal: Overcoming the common barriers to efficient risk assessment also entails viewing regulatory requirements as practices that contribute to achieving overall business objectives. Adherence to regulations helps in sustaining business performance in a risk-intensive world by avoiding financial penalties, reputation damage and business closures. Firms fail when they try only to fulfill compliance obligations independent of their everyday business operations. In the journey of risk assessment, successful enterprises take the road less traveled and do not view compliance as the destination but consider it as the natural result of a fruitful journey.
Working towards a common goal: Organizations that proactively work towards achieving the common goals of risk assessment – determined by a business’ own goals – sustain business continuity in an industry-defining manner. To ascertain prolonged performance, it is imperative to ensure participation of stakeholders including the senior leadership and business units at all stages of risk assessment, which ensures that the barriers to efficient risk assessment are removed.