The Importance of Risk in Business
Without an effective risk management plan, a business cannot define its future objectives. Arguably one of the most important aspects of an organisation, risk management done right is what protects an organisation against losses and equally enables it to capitalise on opportunities.
By having a proper plan in place, risk management is the thing that maximises a company’s valuable resources like time, income and even star employees; protects the people involved with the business from clients and employees to key stakeholders; and alleviates any legal liability or the threat of litigation.
The importance of risk management in an organisation is quantified by how well it deals with the many factors that exist within and externally of the business. A prime example is with the impending data protection regulation. As the 25 May date for the EU GDPR edges ever closer, firms should be taking steps to evaluate and strengthen their internal governance. Non-compliance is but one internal issue that poses a risk for organisations, in addition to the very scary reality of data breaches which seem to fill global news wires almost daily.
Of course events that take place outside of the firm’s remit must also be properly planned for, as changes in the political, sociological and economical landscapes can directly affect businesses. Fluctuating interest rates, a controversial tweet from President Trump, a security breach in the company’s network; predicting and protecting against these volatile stimuli is what makes risk management important in business. It is like the parent of a wilful teenager, using its experience and foresight to prevent them from making irreparable mistakes, while also providing a safety net that allows them to carefully harness their potential.
Effective risk management should encapsulate crisis and reputation management in its strategy, particularly as projecting a strong reputation builds and instils trust in clients, stakeholders and business partners alike. This all to further the growth and success of any organisation which is only as lucrative as the power of its brand allows.
In this vein, for organisations creating their risk management strategies for 2018, there are factors to consider that reflect the way society as a whole operates. Take social media for instance, it has become a crucial aspect in all areas of life, not least business. Companies need to seriously consider the impact of the likes of Facebook, LinkedIn, Twitter and other social media platforms on their public reputation. Understanding the importance of reputation risk management in this way is key for modern enterprise as every Tom, Dick and Harry is handed a soap box from which to air their opinion, thus requiring businesses to mitigate any inflammatory thoughts circulating to their detriment.
The importance of risk management in an organisation is what creates a positive working culture, maintains compliance across the organisation, upholds strong corporate values, sets the tone for handling high profile crises and remains competitive and present in the public consciousness.