In both risk management and day-to-day life, it feels as if the extraordinary has become simply … ordinary.
Just think about the past five to ten years. On levels both cultural and geopolitical, we’ve lived a lifetime of history since the mid-2010s: the B-word (Brexit), the C-word (Covid-19), countless world leadership controversies, the refugee crisis, war in Europe, the ongoing cost of living crisis…
And breathe, risk managers. It’s all going to be okay.
It’s safe to say that a more agile approach to risk management is needed to account for it all.
Not only that, but we can also comfortably say that risk management is more important than ever. While risk professionals have enjoyed a boost in respect across businesses for dealing with, well, all the mess, it’s now time to look forwards.
Stick around to find out exactly why risk management is important in 2023, and remember to sign up to our community to make sure you don’t miss news and blogs like this.
There are simply more risks now
This probably doesn’t require much explanation, but it’s important to delve a little deeper.
Today, risk management is more important than ever simply because risks are numerous and increasingly complex.
A Statista survey carried out among risk managers in late 2021 showed that cyber incidents (such as cybercrime, IT failure/outage, data breaches, fines/penalties) are easily considered the leading risk to businesses worldwide.
Thirty years ago, this category of risk simply didn’t exist – at least not in the same capacity.
Risks like this require expertise from all across a business (more on this later) and don’t tend to happen in isolation.
On the opposite end of the spectrum, the world itself is becoming a more volatile place.
In early 2021, the World Economic Forum ranked post-Covid business risks by likelihood, and the top five paint a clear picture:
- Extreme weather
- Climate action failure
- Human environmental damage
- Infectious diseases
- Biodiversity loss
Four of these directly correlate with climate change (in fact, all five do), a phenomenon that certainly isn’t going anywhere.
If businesses are to survive a landscape littered with landmines, labelling risk management as more important than ever is a no-brainer.
Risk management is accepted as an important business enabler
You’ve thought up a great new business strategy that targets a gap in the market.
The finance team are giving you the green light, it’s been signed off by all of the board and – wait, who’s that?
Gah. It’s the risk managers. Here to hang a big old question mark over the new plan.
This is certainly how we used to think about risk management. It’s the leash around your business’s neck, right?
Wrong.
More than ever, risk management is seen as important because it’s come to be accepted as a business enabler. After all, many risk professionals would argue that their role isn’t even about control, as such – it’s about navigating risk in order to make wiser business choices.
As noted by Partners& for B4, effective risk management “enables your business to make better decisions, avoid the typical pitfalls, and deliver on its plan”.
Whether its name misrepresents its intentions is another question, but the fact remains that risk management, more so than ever, allows businesses to navigate a difficult landscape all while minimising issues and maximising opportunity.
We’ve learnt the importance of predicting the unpredictable
Few of us could have predicted an event like the Covid-19 pandemic.
Its scale and impact on business was – get ready – unprecedented, and highlighted the urgent need to prepare for the worst.
Because, let’s face it, the events of 2020 hit us harder than when we realised the 90s are now thirty years ago.
Did you know, for example, that five separate billion-dollar companies filed for bankruptcy in 2020 in the US alone?
No? That’s because it was actually more than 50.
Of course, given the erratic nature of events like this, it’s near-impossible to properly prepare. Instead, it should be thought of more as a lesson in having policies and procedures in place for when something does occur.
Untreated risks come back to bite us – the past couple of years have shown it
Risks come and go – that’s the nature of them. Right?
Well, just because a risk is no longer on your radar, it doesn’t mean you should pretend it was never there.
We hate to bring it up again, but cast your mind back to the UK’s first lockdown. And then the second. And then the third. And then … wait, how many were there again?
The point is, businesses and people alike enjoyed a collective exhale after each lockdown ended, only to later be stuck in the exact same situation.
It’s the same with business risk. If left untreated – or if you have no plans in place to combat said risk – you can’t expect that it’ll naturally leave and never come back.
Failing to prepare is preparing to fail, after all.
That isn’t to say that every risk needs to be treated. If you’re opting not to address a risk, though, make sure it’s done consciously. As the Institute of Risk Management (IRM) notes, “You don’t have to leap into action for every risk [but] make sure everyone knows that it’s an informed decision”.
So yeah, risks are kinda like boomerangs. Don’t half-heartedly throw one out and then leave your guard down when it comes back around.
The key takeaway here is that business isn’t static, and therefore neither is risk.
Businesses are becoming more collaborative
The importance of collaborative risk management is becoming recognised, but businesses themselves are becoming more collaborative too.
Risk impacts every area of a business. Its departments. Its product. Its people.
Today, there’s a greater move towards establishing progressive risk cultures across multiple industries.
Writing for Corporate Compliance Insights, DeLoach says that risk culture can be further improved by:
- Embedding it in the organisation
- Making it a priority at the highest levels
- Undertaking an integrated approach
- Periodically evaluating progress
- Being alert for signs of change
Risk management technology is here and it’s here to stay
Not only is risk management more important than ever, but risk management technology is more important than ever too.
As mentioned before, cyber and digital threats aren’t going anywhere – so risk professionals need to get savvy in how they combat them.
Thankfully, that’s what risk management software is for. RegTech solutions such as RiskSmart replace the clunky, manual, and data-poor aspects of the job with a future-ready solution.
If you’d like to find out more about how technology can better your risk management experience, click here.
