Optimizing risk management in a post-COVID world
2020. 2021. Risk. Manage. Change. Observe. Adapt. Continue. What other words describe navigation of the general business environment in the 2020s? How has our business mindset changed? With a focus on risk management, we explore the new ways of thinking that the previous 18+ months have taught us.
As lockdowns continued into 2021, and whilst vaccination programs began in earnest, the stakes went up - businesses were required to show their longer-term resilience as it was demonstrated that we would have to bunker down - potentially even into 2022. Ever emerging variants of the virus meant it was consistently a case of three steps forward, one or two steps back.
What wasHow has the experience of 2020 and 2021 changed our mindset? Truth be told, risk management activities probably weren’t on the radar for many.
The topic was often flicked onto one or two operations or compliance managers to deal with, resulting in a risk matrix being created and stored in some dark corner of a corporate wiki or some place similar. A board submission was possibly created. In any case, it was quickly forgotten about.
Black Swan EventA Black Swan Event is an unpredictable event that directly impacts you and your business. One that pulls away your revenue stream, destabilizes your entire organization, and decreases shareholder value.
In the past, ‘bad things’ may have happened to other businesses, but not to yours. Black Swan Events tended to occur somewhere else in the world, or in some other industry. Don’t forget that we tend to only truly appreciate things when we see them in front of us - and now that certainly has happened! This time, the Black Swan event has directly affected your business. It’s looming right in front of you. It’s affected businesses all around the world and in all industries, and the uncertainty and instability it brings could not be more profound!
Collectively, we now appreciate that the last thing we expect can indeed happen to us without warning. That we need to be far better prepared for other things that can go wrong. A cursory look through the archives shows that some astute people did in fact predict something similar to this pandemic – Bill Gates spoke about such an event in a TED Talk in 2015! Is it fair to say we can do a bit better? Is it time to reconsider how we deal with risk management in the context of our general business framework?
Looking at risk management in a new lightGiven what we now appreciate from recent events, shouldn’t we consider it the case that the healthiest businesses – those that can adapt to an ever-changing business environment, and those more likely to provide a healthy return to stakeholders - are those that have an enterprise level risk management plan that can best be described as agile? One that permeates into the business strategy and general organizational culture?
The healthiest businesses:
- Have a risk management plan that can proactively determine risk based on nature and likelihood, and ready-made workarounds that quickly allow the business to change course with minimal fuss, and in a way that buffers the business against Black Swan Events.
- Have a risk management plan that doesn’t just look at compliance risks in a siloed fashion, but is cross functional and also looks at general strategic risks.
- Give investors confidence in their businesses by utilising the best analytical software and systems to ensure that proactive risk management flows through to general operational functions, and is ingrained in the culture of the business.
- Have an enterprise level risk management team that pulls in senior members of management, and confidently analyzes the organization’s evolving risk appetite, whilst also trying to stay ahead of the curve on workarounds.
What will beFor us, the paradigm is simple. The mindset has changed, and so have expectations. The Black Swan Event has sent us the strongest possible reminder that when things can go wrong, they can do so quite spectacularly, causing businesses instability and loss of shareholder value. We have been reminded that these things are often completely unexpected – the last thing on our horizon.
However, great reflection has demonstrated that we can do better in terms of preparation and planning, and that a more sophisticated approach is expected going forward with regard to risk management. Not only will this buffer organizations against Black Swan Events to the greatest extent possible, but it will also protect the interests of shareholders and other stakeholders.
It is those organizations who are astute enough to realize this shift in expectation is at least for the long term, and who realize the intrinsic benefits of a more sophisticated approach that will be best placed in 2022 and beyond.
An agile approach to risk management can only occur with full visibility over your critical information, and insights that present the best path forward at any given moment.
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Author Chris Bullock is Senior Legal Risk & Compliance Specialist at Ansarada. Chris has worked in consumer electronics, media, and general professional services consulting, with an experience focus in Risk & Compliance management, regulatory affairs, business implementation, project management, and R&D.