Risk management used to be a slow, laborious, disconnected process with spreadsheets and checklists circulated through an organization’s email system. It is no wonder that risk management was left to be managed independently by various departments, with the ways risks interact across domains often overlooked. The limits of the risk management toolset limited the reach of risk management.
The risk management landscape has changed – and continues to morph - with organizations contending with more risk while trying to build greater operational resilience all at once. Luckily, as risk evolves, so do the tools used to manage risk. New tools allow live reporting from mobile devices, connecting front-line stakeholders to central risk management teams. Easy to use and automated visualization, prediction, and even machine learning software take the guesswork out of trying to anticipate future risk. Quantization allows different kinds of risk from all across an organization to be directly compared.
These innovations come at a time when organizations are anticipating more disruptions. In 2020, we surveyed employees from all levels of a variety of leading organizations who not only survived but thrived during the last year of disruption in their risk management efforts. Nearly three out of four respondents felt that their organization’s risk profile would expand in the next two years. To get more information about current best practices in risk management, read our report “The State of Integrated Risk Management.”
New Risk Management Tools to Solve Old Problems
Risk management that relies on qualitative risk assessments is outdated. Heatmaps simply put colors on words like “minimal” or “catastrophic” without offering any guidance on how to allocate resources toward risk mitigation. Qualitative assessments also cannot tell you the price of a “catastrophe”, what steps need to be taken to avoid fallout, and how to weather the proverbial storm to come out successfully on the other side.
The limitations of qualitative assessments and the struggle to determine how expensive a given disruption could be has led to the creation of more rigorous quantitative methods. While it is easy to see that a “minimal” effect is better than a “highly adverse” one, there is no qualitative way to compare multiple small effects against one larger one.
Quantitative risk assessment tools allow risk management teams to perform just such an analysis, as the universal language of numbers allows for apples-to-apples comparisons and aggregations. Organizations can now place hard numbers on how to allocate resources with the new tools of risk assessment and management.
Smart Organizations Look to the Future
An organization that makes sure its integrated risk management platform can incorporate future developments is making smart moves. As any organization that has had to transition legacy systems into digital tools knows, the task of incorporating new methods can generate a great deal of friction.
Part of an organization being able to incorporate future risk management methods and developments is ensuring that stakeholders understand that integrated risk management is an ongoing and ever-evolving process. Today's challenges require managing a cultural shift from reactively checking the boxes for compliance to a proactive risk management model that necessitates participation across the organization. Tomorrow’s challenges will require as much, if not more, engagement.
Operational Resilience Is More Critical than Ever
The pandemic demonstrated just how important it is for organizations to be able to adapt quickly to rapid changes and sudden disruptions. Digital risk profiles expanded as much of the workforce began to work remotely, requiring critical information technology assets to be placed online. The struggle to achieve regulatory compliance grew as new mandates to limit the spread of the SARS-CoV-2 virus were put into place. Supply-chain disruptions limited inputs and choked the market for outputs of physical goods and services.
The dense web of connections that form the global economy and the strong ties between adjacent organizations increase exposure to third-party risk and disruptions. The ease with which the internet makes it possible to find new vendors or service providers means that organizations that have operational resilience stand at an advantage over organizations that are unreliable or inconsistent.
Maintaining Integrated Risk Management Momentum
Integrated risk management is a journey - not a destination. Even organizations with well-structured programs continue to need to connect risk to the business with cross-functional processes. We have found that small, achievable steps that can be maintained over the long run are better for keeping momentum than large, all-hands-on-deck efforts.
Integrated risk management should be as ingrained in the undertakings of an organization as the core mission is. After all, being able to increase operational resilience and mitigate disruptions allows for organizations to continue providing the services they provide. When risk management is deeply integrated into workplace decision-making and actions, organizations can do what they do best more effectively.
Our 20+ years of industry leading experience along with the analysis of our current customer base and general risk management community gives us enormous insight into the way risk is being managed. We know that departments have different risk profiles and operational requirements, so we built a common platform called Archer that integrates risk from a variety of sources. Archer provides a central place for governance, risk, and compliance integration, automation, and reporting. The platform can be customized and even extended, offering OOB solutions and specialized use cases for managing an organization’s risk profile.
We’ve distilled this industry knowledge into our new report, “The State of Integrated Risk Management.” Read the report today to see how top companies have worked to achieve operational resilience, and what steps can be taken to mitigate changing risk in the future.