The global business environment has become significantly more complex in the last decade alone.
These transformational shifts—whether technological, relating to a larger scale of operations, or financial—have presented several opportunities for growth and success to businesses.
However, they’ve also amplified systematic risks related to economic, geopolitical, technological, and environmental concerns.
Therefore, it’s critical for companies to take proactive measures and embed risk capabilities in their strategic plan in order to steer toward resilience and ensure success.
Importance of Proactive Risk Management
Adopting a proactive risk management approach allows an organization to avoid and manage risks—both existing and potential ones—and enables them to shield themselves from crises and unfavourable events.
It also helps companies manage and measure emerging risks. Learning about potential risks, their probability, and their impact empowers organizations to minimize, if not eliminate, their losses.
Implementation of Proactive Risk Management
Proactive Risk Management is not a one-time process, but a continuous one that needs to be embedded as an integral part of the risk culture of an organization. It’s a discipline and a strategic control mechanism that a business has to incorporate in its overall business strategy.
How does it help?
The implementation of an effective risk identification and management plan limits a business’ exposure to potential identifiable internal and external risks. A proactive approach towards risk management can potentially save millions of dollars for organizations and maximize value for stakeholders.
The Challenges
There are several challenges that companies—especially SMEs—face when trying to develop a coherent risk strategy for their business. For instance, they may lack proper understanding in regard to the risks surrounding their business. Moreover, they might lack the relevant tools and required resources to make an effective risk management plan.
How to create a Proactive Management Strategy?
Effective risk management strategies need to be implemented by strategic level management. Senior management should set the direction and scope, middle management should handle the risk mitigation process, and lower level management should manage monitoring and reporting processes.
More importantly, businesses need to unify their risk management initiatives by using an Enterprise Risk Management (ERM) framework. This enables them to align their corporate strategy with business operations and helps them to address risk factors—both internal and external—that may have an adverse impact on the company’s success.
Some of the key steps include:
· Instituting a culture of risk awareness by providing regular training.
· Establishing an objective risk identification process on a routine basis.
· Equipping business units with relevant tools to perform risk evaluation and monitoring.
· Introduce compliance programs to address financial and regulatory risks.
· Define a process to categorize strategic risk opportunities that—if leveraged successfully—can generate positive returns.
Furthermore, an organization must also opt for a flexible approach to move toward a proactive risk management approach.
This will include making a distinction between Key Performance Indicators (KPIs) and Key Risk Indicators (KRIs), as the former is output-focused and can be manipulated easily.
Incorporating KRIs in the metrics will enable a business to understand how risky an activity is and plan accordingly.
Cyber Security in Risk Management Plan
According to a survey, cyber incidents such as data breaches, IT failures, and other cybercrime pose a huge threat to global businesses in 2019 and in the future.
An ICAEW report shows that the top five cyber risks that businesses need to address include:
· Ransomware
· Phishing
· Data leakage
· Hacking
· Insider threats
A comprehensive risk management plan includes well-developed cyber risk mitigation processes, procedures, and staff training that can help you protect valuable digital assets. There are several online guides available online to protect your business from cyber crimes.
Final Words
In essence, shifting from reactive to proactive risk management approach and creating an effective ERM model warrants restraint, patience, and—more importantly—a lot of discipline. A dynamic and proactive initiative will help your company to achieve effective governance an result in improved business performance.
If you are looking for dedicated managed security and IT solutions to safeguard your business against potential cyber attacks, consider hiring the services of Lean Security.
We are an Australian-based security firm that provides dynamic and effective solutions to our customers including penetration testing services among several others.
We are a reliable penetration testing provider that offers complete security risk assessment to ensure that every modicum of your business application remains protected.
Contact us by calling +61 (2) 8078 6952 or send us an Email at INFO@LEANSECURITY.COM.AU for more information on how to create a proactive risk management plan and make your business resilient.