4 Ways to Fortify Your Company’s Risk Management Practices

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Because every business has some exposure to risks, managing them is par for the course. However, the internal weaknesses and external threats a company deals with often evolve. Sometimes new developments are slow to emerge, but in other cases, they happen so quickly that leaders find they’re unprepared. Whether risks are slow-burning embers or rapidly moving fires, these liabilities put a company’s assets on the line.

Protecting your assets means your risk management plan must evolve as the vulnerabilities and threats you face do. A dynamic plan boosts security measures and constantly evaluates a company’s systems and resources across the organization. Below we’ll discuss four ways you can strengthen your business’s approach to risk management.

1. Develop a Holistic View

Risks are rarely isolated to one department, employee, or job function. What IT does to keep customer data safe from cyberthreats is only one piece of a larger puzzle. Data security involves everyone in the company. Even the best network security application won’t guard against someone disclosing sensitive information by malice or mistake.

To address and plan for risks, leaders must have full transparency into an organization’s procedures, practices, systems, and resources. Data silos between departments and job functions can make it difficult to develop a holistic view of what’s happening. For instance, employees outside of IT may know the company has anti-malware programs installed on the network. But beyond that, they’re probably not clued into everything IT does to protect sensitive resources.

Disconnects between departments can be a problem since procedures and practices in one impact the other. Likewise, an organization can become siloed from what’s happening in the broader industry, national, and global environments. Some organizations that didn’t assess and address threats, such as market disruptions, no longer exist.

Integrating threat assessments into a holistic approach can help remove blinders. Governance, risk, and compliance (GRC) improves transparency and exposes more vulnerabilities by providing an overarching view. With a GRC tool, companies can better see the connections between departments’ practices and resources. For example, IT’s cybersecurity programs may be top-notch, but they’ll be of little help if marketing’s password practices are too lax.

2. Invite the Right Stakeholders to the Table

Data silos form because of isolation and limited perspectives. Either employees aren’t reaching across the aisle to collaborate, or their viewpoints are too similar. When risk management plans are at stake, it helps to include as much diversity as possible. In other words, it shouldn’t just be top-level executives deciding which threats and weaknesses are priorities.

Instead, you should get the perspectives of a more varied group of stakeholders. This group can include department-level directors, front-line supervisors, and individual contributors. Including stakeholders who don’t participate in the company’s operations also helps broaden perspectives. These individuals might be investors, external auditors, or community members and customers.

Third-party and first-party customer and market data are additional ways to get a pulse on potential risks. For example, is your business located in an area that’s decreasing in size and population? What are the main drivers of migration? If they’re 100% economic, your company’s risk management plan might look different than if they’re because of climate change. The former could address those threats as more cyclical; the latter might involve business relocation.

3. Evaluate Risk Management Strategies

Companies usually implement strategies that avoid, retain, mitigate, prevent, or transfer risk. While applying one or more of these strategies helps manage risks, there are potential drawbacks that companies must assess. Each strategy or alternative carries its own risk according to three distinct categories or dimensions. As you determine optimal risk management strategies, you also have to evaluate these dimensions.

The three categories include the risks of a specific strategy’s implications and potential misalignment with a company’s mission and values. There is also the risk that a strategy will become irrelevant in the execution phase. Consider a scenario in which you decide to outsource cybersecurity to an outside vendor. You opted for this approach to managing cyber risks because you’re unable to manage network resources and guard against sophisticated threats. 

However, this strategy gives control of your company’s data and network resources to someone else. This risk transfer strategy may not match your business’s goal of keeping critical tasks in-house. And as your chosen vendor assumes responsibility for your network, you may discover they’re not adhering to your industry’s standards. Strengthening your company’s approach to risk management means thoroughly assessing the threats that exist within potential strategies.

4. Consider Future and Emerging Threats

Many people prefer to look at the here and now. Looking too far into the future is sometimes seen as pointless since circumstances and environments can rapidly change. However, short-term thinking also has limitations since it overlooks obstacles business leaders may need to consider. For instance, focusing too much on increasing immediate profits might encourage practices that compromise long-term solvency.

Building an organization’s resiliency means evaluating the likelihood of future threats and disruptions. Some of these may be extreme and sudden, such as a global pandemic. Others might be just as severe but more likely to emerge with time, including climate change and political instability. A few could be more predictable and provide warning signals, such as regulatory changes, emerging technologies, or weakening economies.

Understanding the possibilities of different risks and their sources helps businesses prepare for them. Making charts that indicate probability and impact is effective, but so is building an adaptable and agile culture. Look at strategies to address and shield against future and emerging risks now, starting with the most probable and impactful. Establishing cross-functional risk management teams can also ensure companies implement appropriate strategies in time.

Strengthening Risk Strategies

Risk management isn’t optional for most businesses. However, designing and executing optimal strategies requires more than a textbook approach. Because every company operates with and in different dynamics, risk management plans must be holistic and adaptable. To strengthen your business’s strategies, you can integrate them into governance and compliance, involve more stakeholders, and evaluate implications. Also, don’t forget about future disruptions.           

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