You cannot completely eliminate risks – but you can reduce them
Designing a good risk management strategy allows companies to contain costs
Every business should have a well-structured risk management system able to anticipate and identify those risks that could potentially become an important threat. In business terminology, as suggested by Investopedia, “risk is the exposure a company or organization has to factor(s) that will lower its profits or lead it to fail”. And managing a risk implies elaborating and performing specific processes, methods and tools. Basically, risk management is all about ‘evaluating which risks should be dealt with and implementing strategies to deal with those risks.’ Especially it concerns small companies and startups: there should be careful identification, assessment and control of risks in order to avoid unpleasant losses and extra-costs.
According to the Global risk management survey formulated by Deloitte, ‘risk management today is confronting a series of substantial impending risks that will require financial services institutions to rethink traditional approaches. The global economy has strengthened, but storm clouds remain on the horizon in the form of tensions over tariffs between the United States, China, the European Union, and other jurisdictions that could potentially result in lower trade volumes.’ In addition, GDPR imposed new commitments to all financial institutions that are focusing on enhancing data privacy.
What is the role of a Risk Manager?
A risk management specialist is involved in almost all areas of a business and they are responsible of the accomplishment and successful development of the enterprise. After identifying various types of risks, a risk manager has to find strategies in order to ‘minimise, eliminate or transfer the risk.’
What about the key areas that a risk manager has to manage? Here is the list:
Therefore, a risk manager should also have very specific competencies such as financial, analytical, market, sales and critical thinking. An excellent risk management professional is highly versatile and extremely opened to ‘dedicate time to work closely with the Compliance department and invest time in learning about the relevant regulations for the firm and industry they work for. Solid risk managers work the best out of regulations rather than having a tick the box approach.’ It is crucial to stay up-to-date with the latest financial regulations and develop networking to learn from the experience and expertise of others.
Why is it imperative to build a strong risk management plan?
No matter the industry, every company should aim at building an excellent risk management plan by using ‘preventative measures’ in order to assure business continuity and minimize risks, considering that generally they cannot be completely avoided. Given that every business evolves at a high rate, all the previous processes should be reviewed and be subject to new and more adequate improvements. Therefore, one of the main purposes of risk management is about renewing and improving processes.
Elaborating a good risk management system revolves around the way you manage risks once they have been identified. How you accept, transfer, reduce and eliminate risks will be part of the overall strategy. Monitoring closely all the main phases will lead to significant improvements and formalization of the so-called ‘risk management policy’.
The main advantages of having an efficient risk management plan are:
- Higher quality of processes
- Better communication within the company
- Employee and top management Awareness
- Higher chances of success
- Good profit
If you want to learn more about the latest trends and topics related to risk management, read this online magazine completely dedicated to this fascinating field. And don’t miss our latest blog posts!