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Taking Control of Risk Management

Posted on 18th July 2022

Author: Kirsty Martin

The world is constantly changing, and risk management needs to keep up. Here are some key lessons to take control of risk management.

The impossible is possible – so take your chance!

The unlikely and unexpected can and does happen. In recent years we have seen organisations across all sectors rapidly transform in response to unexpected events (pandemic, anyone?), with changes that would usually have taken months or years to rollout being accelerated into weeks or even days.

Although mostly implemented reactively, many of these transformations have had a positive impact on employee and customer experience and accessibility. Think…

  • Remote working
  • Increased flexibility
  • Telehealth
  • Improved digital platforms
  • Self-service options etc.

Which raises the question… Why had they not already been widely embraced?

The key lesson here is that transformation can occur quickly, and innovative organisations shouldn’t wait for a catalyst, such as a pandemic, to force their hand before fully committing to transform where opportunities are identified. If the last few years have showed us anything it’s that rapid change is possible, and people can adapt faster and more effectively than we perhaps give them credit for.

What does this mean for risk management?

It’s time to walk-the-walk on a positive risk culture that uses risk management to identify opportunities and drive innovation. Decisions can be made quickly while still taking a risk managed approach, and changes can be rapidly implemented and scaled where they are prioritised and staff are empowered to do so.

We’re more interconnected than we think – so consult broadly

We often think of organisations or industries individually. We conduct various analyses of our internal and external environments, but still tend to focus on those elements that we can see may have a direct impact on our particular industry. Given our highly complex supply chains, changes in seemingly unrelated industries or communities can completely shock our operating environment through indirect impacts.

For example, a single ship getting stuck in the Suez Canal in March 2021 had vast and lasting global impacts on almost every industry from electronics to construction to food retail. Most organisations (outside of those directly involved in logistics) would never have considered that as a risk to their business.

Or the pandemic. We saw how the virus and related policy decisions had profoundly far-reaching impacts across society. Many of these impacts would not have been immediately obvious when looking at the risks through the purely epidemiological or economic lenses that tended to dominate the discussion. To understand the full picture, input is also required from public health policy experts, heath care workers, sociologists, businesses, schools, unions and more.

The same is true for most decisions across any organisation. Without input from a broad group of stakeholders from the various teams, organisations, communities and more that combine to create our operating environment, we may not understand the full impact of our decisions and the flow on effects that may influence our intended outcomes. 

What does this mean for risk management?

Leaders need to deeply understand the supply chains that their organisations rely upon and consider both direct and indirect risks. This should include consideration of broader essential services such as childcare, schooling, healthcare, retail and logistics and the flow on effects that disruptions or changes in these sectors could have on your organisation. We’ve seen many times in recent years the profound flow on effects for broader labour market participation, spending behaviour, consumer confidence etc. that can come from issues in core services.

There will always be another crisis – so be ready to adapt

The word unprecedented has become a cliché. Organisations in 2022 are dealing with multiple and sometimes interconnected crises. Pandemic, war, climate change and more. These and other crises will continue to cause disruption and we need to be proactive to mitigate and adapt. Taking climate change and the associated increases in regularity and severity of weather events and natural disasters as just one example, organisations should be (at a minimum):

  • Updating WHS policies (for extreme heat, air quality, flood safety etc.)
  • Upgrading or relocating property holdings (to mitigate more regular flood risk, expanding fire risk areas, rising sea levels etc.)
  • Contingency planning for severe weather-related supply chain interruptions.
  • Reassessing business models, services, products, supply chains etc. to minimise carbon footprints and ensure sustainability

Organisations will continue to be faced with highly complex and sometimes abstract risks that will require both long term proactive strategic planning and the ability to react and adapt in the short term when faced with specific incidents.

What does this mean for risk management?

Organisations need to have an active and ongoing risk culture that is able to engage with long term risks and opportunities at regular intervals whilst also managing risk in the everyday in operating environment. Risk management cannot just be an annual ‘tick box’ exercise and it cannot be ‘set and forget’. Organisations can’t get complacent that ‘after the crisis’ everything will go back to how it was. The world is forever changing, and as such risk management needs to be invested in and nurtured as an ongoing process and mindset.

Risk Management in 2022

So, what are risk forward organisations doing?

  • Identifying opportunities and taking them! An effective risk culture will provide regular information that supports faster decision making and enables organisations to take risks and lead the way in doing things differently.
  • Learning more about themselves and the complex supply chains and communities in which they operate.
  • Investing in and nurturing an ongoing risk management mindset across their organisations.

As always, there is no one size fits all approach to risk management. Rather, each organisation must assess their current level of risk maturity and understand the way their organisation functions to identify the best approach. For some (most) organisations, a significant amount of education and support across all staff will be required to move towards a more risk forward approach that reaps the rewards of these lessons.

If you’re looking to mature risk management at your organisation, Sententia Consulting’s highly experienced risk consultants can help. Contact us today.


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