How Risk Discovery and Mitigation Can Help Stop Future Headaches
Have you thought about how risks are discovered at your organization? Do employees understand the risks that exist within their work areas and how it impacts the overall organization?
When we’re occupied with day to day functions, we typically don’t see dangers and uncertainties lurking around the corner. These uncertainties are threats often embedded within business processes and environments that are not easily identifiable. Threats can come from sources including, but not limited to: strategic; operational; financial; legal; regulatory and compliance; credit; product/service; and natural cause/disaster risks.
The Value of Risk Assessments
One way of understanding risk is to document processes and conduct a risk assessment.
The goal of a risk assessment is to identify potential threats to the business, down to the unit level, and to understand the root cause of these risks. Then you can start a discussion on what type of risk mitigation efforts are required: acceptance as a cost of doing business, transference (insurance) or mitigation (control environment).
These activities bring you one step closer to establishing an effective Risk Management Program.
What role does one play in this risk arena? Basically, a Risk Management Program is the identification, evaluation, and prioritization of various risks, followed by an analysis and documentation of the proper courses of action.
A Six Step Risk Assessment Plan
One way to assess risk within your immediate business area(s) is by applying the following steps:
- Define your business process by creating process flows with narratives.
- Identify the potential risk areas within the process flow.
- List the controls or the lack of controls (gaps) in place.
- Create a risk ranking scale and map specific risks to your business areas.
- Have risk discussions with management to determine the risk appetite and tolerance.
- Align risks at the Enterprise Risk level. Risks should be aligned from different business areas to higher level risks (enterprise level).
Bringing Uncertainty Into A Manageable Form
Although risk management can take many forms, these initial steps will help you understand existing risks and identify potential risks. It will allow you to have a better pulse on the unknown.
The key to risk management is to bring uncertainty into a more manageable form while not disrupting the organization’s overall business goals and objectives. The better the control over a risk, the less the likelihood of an unexpected loss. A good Risk Management Program will result in meeting the business objectives of your company or organization at reduced costs.
You Need "All Hands-on Deck" for Risk Management
Organizational risks must be understood and managed by all employees. The culture of a well risk-managed business can be reflected by its people, processes, and technology and how each of those assets are deployed and dynamically related to each other. Having the proper strategic efforts within the specific business units, including transparency, and the understanding of how these risks relate to the broader organization will allow risks to be managed at the tolerance level that management is willing to accept.
Connect with a Freed Maxick Risk Management Expert
If you would like to learn more about how to minimize risk within your organization, contact one of our Freed Maxick risk professionals here, or call us at 716.847.2651 to discuss the risk services that we offer. Our risk professionals currently work with clients from multiple industry sectorsWe will work with you and your organization to complete an assessment that will identify risk, make recommendations for improving your current processes, and advise you on risk management best practices. We look forward to working with you.