Organizations are recognizing more and more the importance of aligning risk management with their corporate governance, strategies and objectives. Not only do executives need to ask, “What do we need to do to achieve our goals?” but also “What will stop us achieving our goals?”
In order for risk management to be effective, an organization’s strategic objectives need to be understood at all levels. This will ensure that risk can be managed correctly across the business. I once overheard someone saying, “Why spend time managing a risk that is not going to impact on the organization’s strategy even if it were to materialise?” Well, everyone, starting with the board and cascading to all members of staff, needs to know the focus and purpose of the organization so they can manage their responsibilities in line with the strategic direction. This is where risk management forms an essential part of effective corporate governance.
All managers need to be tasked with identifying and managing risks within the context of achieving objectives. Workshops are a very good tool to ensure that everyone is on the same page, understands what they need to deliver, and knows the required level of commitment.
Another area that organizations should also be thinking about is modifying objectives and strategies based on new risk assessments. There are numerous examples of this not happening, where an organization has not reacted to a change in the market place, such as a new piece of technology, and have been left behind.
It is worth mentioning that the word ‘risk’ always seems to have a negative connotation (risk = bad) but it is also important to weigh up risk in terms of realizing opportunity and potential growth. Many corporate strategies will include growing the organization and part of the risk management approach should include how resources can be committed to exploit opportunities within the organization’s defined risk capacity – i.e. the amount and type of risk they are willing to support when pursuing objectives.
There needs to be a shift in focus from risk management as just a corporate function to risk management embedded across the organization and aligned with corporate governance. This is where Mitratech can help by providing risk management software solutions to allow every area of the business to be aware of and work together on managing the risks, and opportunities, faced by the organization.