Active Risk Management as an Advantage in Competition

Friday, 01. March 2019

Active Risk Management
as an Advantage in Competition

Business risks and adjusting strategy and business models to them should already play an important role in management. Today, it is becoming more and more probable that one’s own organization could be harmed by cyber attacks, financial crises, environmental factors and other dangers. To be prepared or – even better – to protect themselves, organizations should know their risk profile by heart and analyze it.

But why do too many know too little about the biggest risks, and how can they identify, assess and control them? And how can any single employee contribute to minimize dangers for their company? We think you have to go the very root of the problem. You have to find out where the causes lie. This is the only way to survive on the market in the long haul and to run a business based on a successful strategy.

Causes for an Unsufficient Risk Management in Enterprises

Risiko Lupe web Enterprises take risks every day naturally. Identifying them makes it easier to assess and to manage potential dangers. What bigger risks are there and how can you prepare for the case they occur? Any sector of an enterprise can be harmed: sales, procurement, human resources etc.

According to the Allianz Risk Barometer 2018, it’s first and foremost cyber incidents and interruptions of operation that cause the biggest risks potential for small and medium-sized companies. In addition to that, the survey reveals that the fear of weather events has risen the most: “Possibly record-breaking damage due to inundations and storms make it necessary that risk managers in Germany take natural disasters into account.”

Swarm intelligence makes the identification of risks easier for companies: Every employee has got a certain knowledge as well as information on their environment. Usually, they share it with co-workers in their immediate surroundings, but not so often with CEOs or colleagues from the strategy department. Sometimes, employees in different branches or regions get important clues and, due to their level of knowledge, discern factors as risky which are out of the management board’s sight. In order to bundle this distributed kind of knowledge, organizations can enable their employees with the help of software to digitize their own knowledge and, depending on their position within the organization, to share the information available to them in a top-down or bottom-up way.

An objective assessment of how relevant and probable a risk is, is needed. Tools like the intelligent strategy software SOLYP3 can support decisions makers by condensing information relevant for the decision and, thus, making it possible to grasp the most important risk factors for an enterprise at a glance. Current market trends are also important for a profound risk assessment. They need to be incorporated into strategic decisions as well. Also, different risk scenarios can directly be run through so their respective consequences can be predicted. Even at this point of time organizations can avoid risks selectively or set up appropriate measures and – if necessary – change processes accordingly.

However, most companies simply lack a clearly defined risk management strategy. Of course, enterprises cannot foresee any potential harm. However, those with active risk management enabled are the ones who will rather be able to react quickly, efficiently and correctly to the dangers. Thus, they can keep the damage as low as possible.

Minimizing Risks and Turning Them Into Opportunities

Chance nutzen web "In the end, establishing an extensive risk management strategy is only possible with the help of all employees. This means, protecting information has to be key in any organizational area and it must be understood as a part of the corporate culture. From the management board’s initiative to the implementation and monitoring in the whole of the organization", RiskNET write. When every employee treats business risks offensively, this can benefit the image and turn former risk factors into enormous opportunities in daily competition.

Credits (from top):
© | Andrey Popov
© | Andrey Popov
© | gustavofrazao