The business landscape of today is in constant flux and continually being disrupted by rapid change. From new competitors with disruptive business models to changing customer demographics and dynamics and technological advancements, we are seeing increasing
paradigm shifts in business fundamentals.
The regulatory landscape too has had to adapt to keep up with these changes, often leaving organisations charting unknown waters. In this scenario, how can businesses ensure that their risk management programme is able to deal with the uncertainty and unpredictability
that they currently face?
The answer is to implement a forward-looking risk management programme powered by technology.
Implementing forward-looking risk management
A forward-looking risk management approach improves an organisation’s ability to manage both existing and emerging risks helping businesses to quickly adapt to unwanted events or crises. This approach facilitates an in-depth understanding of future risks
and their potential impact on business performance.
The focus of forward-looking risk management is on analysing past trends, predicting future scenarios, and proactively preparing for them. It involves carefully assessing processes to determine the potential risks, identifying the drivers and root causes
of these risks, prioritising the risks based on an assessment of their probability and impact, and accordingly preparing a contingency plan.
For these objectives to be achieved, it’s important to take advantage of the expertise of experienced risk managers. Effectively implementing forward-looking risk management requires that it becomes a discipline that an organisation must practice and make
an integral part of the overall business strategy, not merely an initiative. It is not an activity which can be completed in a day or performed in isolation – it needs to be a continuous process until it becomes part of the organisation’s risk culture.
Overcoming obstacles to the implementation process
Organisations can limit risk exposure, save costs, and enhance value for stakeholders by developing and implementing a predictive risk identification and management programme. However, there are challenges that need to be managed and these include a lack
of clear understanding about the spectrum of risks and consequences, a shortage of relevant tools and techniques, siloed data, limited resources, and an absence of a tone-at-the-top.
The creation of a culture of risk and accountability is extremely important as employees across all levels within the organisation need to have the confidence to report potential risks, issues, or incidents to the relevant teams, so they can be addressed.
The organisation needs to have clarity on the breadth of risks facing the business and understand the potential threats and opportunities these risks pose to the overall business strategy in order to facilitate effective and proactive risk management.
Organisations must also ensure that there is proper communication between all stakeholders across functions and harness the benefits of technology to create greater business value.
Leveraging technology for a stronger risk management programme
Technology plays an intrinsic role in building an effective and proactive risk management approach at an enterprise level. To better understand risk, many organisations are deploying software solutions to minimise risk inconsistencies and silos and establish
a single risk taxonomy and culture.
Some organisations are even going a step further by using sophisticated reporting tools and analytics to manage and transform risk data into valuable business intelligence.
This frees up risk managers to spend more time on a deeper analysis of data, rather than just collecting and managing it. In turn, this risk intelligence helps organisations make informed business decisions and act quickly to avoid or control unexpected
Artificial intelligence (AI) is also another area of technology that is next on the horizon for governance, risk and compliance (GRC) programmes but it is vital that this technology is responsible and ethical as well.
AI can easily be misused or overused, even when the intention is good. For example, an organisation may be GDPR compliant, but AI could create intelligence by combining data sets that are privacy intrusive. Hence, it is important that organisations have
a well-coordinated approach to AI governance and why a forward-looking risk management programme can help.
Given all the changes and uncertainties in business today, it has become imperative for organisations to be forward-looking in terms of identifying and preparing for emerging and evolving risks. Instead of just reacting to risks when they occur, organisations
must focus on being proactive and having the ability to consider future risks.
A forward-looking risk management programme, if implemented effectively, can help drive competitive advantages as well as sustainability and growth. It can crucially ensure that both business and regulatory demands are met, business value is created, and
corporate reputation protected.