Risk management: What companies need but don’t think about until it’s too late
Risk management is essential to the survival of businesses. Risk comes in many forms and sources, be it in cybersecurity, natural disasters, a company’s reputation, legal sources to human capital and financial issues.
Naturally, risks need to be minimised or managed to lower its negative impact towards an organisation and its employees, paving the way for risk professionals or risk management managers who can create risk management plans to mitigate these issues.
Despite that, COVID-19 has demonstrated that many companies do not have a risk management plan in place.
A Gartner survey showed that just 12% of over 1,500 respondents believe their businesses are highly prepared for the impact of coronavirus, while 26% believe that the virus will have little or no impact on their business.
“This lack of confidence shows that many organisations approach risk management in an outdated and ineffective manner,” said Matt Shinkman, vice president in the Gartner Risk and Audit practice, was quoted saying.
“The best-prepared organisations will manage the disruption caused by the coronavirus far better than their less-prepared peers.”
Shinkman said board members tend to deal with emerging risks by assuming they will go away and instead focus their attention on what is most important today.
“In good times this methodology is reinforced because sometimes emerging risks really do just go away. It’s when they don’t that problems inevitably emerge,” he said.
Having an enterprise risk management (ERM) function means an organisation is more likely to see risks coming and then mitigate the impact of those emerging risks more swiftly and effectively. A focus on impacts rather than specific scenarios is best practice for ERM, said Gartner.
“It’s nearly impossible to predict exactly if or how a particular scenario will unfold or even when,” said Shinkman. “That’s what creates the ambiguity and often inaction around emerging risks. It’s much more effective to focus on potential impacts and how to mitigate them.”
In speaking about safeguarding businesses during COVID-19, Stijn Spitaels, Ernst & Young (EY) Belgium Strategy & Operations Partner (EY Parthenon) said that a solid risk management approach can help companies safeguard the well-being of their people, clients and other stakeholders.
“It’s therefore key to have the right organisation, people and processes in place,” he said.
Risk management careers
Just about every business across any industry faces risks that can cause the company to lose money or even close. Those who can identify, assess and control threats, however, are an asset for any organisation’s business strategy.
The US Bureau of Labor Statistics puts risk managers under the category of financial managers, and notes that the role is projected to grow 16% from 2018 to 2028, much faster than the average for all occupations. Salaries of risk professionals depend on the field or business in which they’re employed.
Rasmussen College notes that risk managers work with companies in a variety of industries to help minimise that risk. “It’s their job to help a business avoid costly pitfalls and keep all their employees safe and healthy,” they said, adding that this career is vital to companies who want to protect their financial position as well as their general business operations.
Depending on their roles, their responsibilities may include analysing and controlling financial risks.
Those interested in becoming part of the risk management taskforce can do so by getting a graduate degree in the field. NYU Stern School Of Business, for instance, offers a MS in Risk Management that addresses the diverse and dynamic issues of global risk management.
There are also MBA specialisations in risk management, such as one offered by the University of Cumbria which explores the range of concepts and functions of risk management and associated practices within the business sector.
Candidates can also consider taking courses with institutes such as the Institute of Risk Management (IRM), which offers training in a variety of areas including about the fundamentals of risk management and risk culture, to name a few.
It’s worth highlighting that working as a risk professional without a specialised degree in the field is possible, but a certification in the field will definitely give candidates a leg up.