Ensuring the achievement of business performance goals drives corporations to succeed. However, the road to success is fraught with challenges that could stall growth while at the same time draining the fulfillment already achieved. The challenges and threats organizations regularly face are becoming more varied in nature, as risks are evolving. The enhancement of technologies is compounding today’s risks by multiple factors acting together. Therefore, it’s not surprising the sustainability of business performance is affected, when one or more factors that influence operational and financial risks are exposed. Broadly, risks can come from volatile economic and political realities, trade conflicts, natural calamities, product recalls, data breach, insider threat, business interruption, and changing regulatory environments. All of these dynamic factors have magnified the demand for transparency in the risk management process and amplified the effects of the results.
Ideally it is imperative to adopt strategies that will ensure the performance targets are achieved with reasonable assurance the enterprise is protected against the relevant risks. The most vital strategy involves a robust risk management approach, with the recognition that business success is balancing risk and reward, and the objective of risk management is to achieve performance results. It also entails an acceptance that the key aspects that determine performance risk management are not to be confused with enterprise risk management (ERM).
A Subtle Difference in Approach
While both performance risk management and ERM are interlinked to performance enhancement backed by investment and strategy to deliver future growth, their approaches in the aspects of Business Spotlight, Tools of Action, Program Benefits, and Accountability should differ. For example, with respect to the aspect of Tools of Action in ERM, typically the emphasis is more on survey and board level discussion. On the other hand, for the same aspect, i.e., Tools of Action, the emphasis in performance risk management should be on process enhancement and review of risk drivers.
Likewise, the Business Spotlight in performance risk management should cover:
While Program Benefits in performance risk management should include: reduced volatility, superior performance, enhanced capacity to grasp opportunities and guard the business, with the Accountability tied to the CFO, CRO (contract research organization) and COO. Further, the approach to sustaining business performance should be characterized by:
This takes us to the vital factors that define performance sustainability in businesses:
Unambiguous Approach and Controlled Access
Gaining critical insight into the potential adverse effects of risk coupled with controlled access to business systems can ensure performance longevity. The development of comprehensive risk management solutions guided by operational and regulatory perspective is the key. Successful companies quickly evaluate, develop countermeasures and adopt robust monitoring strategy specific to regulatory necessities to prevent unauthorized access to their systems and data.
Enhanced Risk Strategy and Efficient Processes
Profitable companies align their goals and business strategies efficiently. This enables proactive identification and enhanced visibility of risks that matter most to the company of risks. Companies that taste prolonged success reduce the level of efforts associated with performing and testing controls. They enable process efficiencies through automation and software service.
Optimization of Risk Management Functions
Optimized functions refer to the efficient management of all relevant risks – financial downside, and process and compliance specific. The functions also include elimination of duplicate risk management practices, establishing harmony among business, IT and compliance, and fruitful top-down and bottom-up hierarchy.
As enterprises face a growing range of risks that include environmental, social and governance (ESG) issues, sustainability programs have emerged. These programs are being gradually integrated into the business strategies of successful organizations, and the adoption of such programs is also attracting more funding to sustain their businesses.
Sustained successful performance in business depends on how effectively an organization copes with the changes brought into effect by ever evolving risks. Businesses that put inclusive risk management methodologies in place will be better positioned to utilize opportunities in a dynamic business landscape.