Do you have a handle on your company’s strategic risks? Even if you think you do, you never know for sure until you start assessing them. A strategic risk assessment can help you identify potential dangers impacting your business’s success. This blog post discusses the strategic risk assessment process and best practices for creating a successful plan.
The Strategic Risk Assessment Process
An assessment reviews an organization’s current and future risks. It helps you identify factors that could impede your company’s ability to achieve its objectives. You can assess risk at the enterprise level or for specific projects. Following the proper steps ensures you cover all the bases.
1. Identify Goals
Once you know what you’re trying to achieve, you can start looking for risks that could prevent you from reaching your goals. You can use various methods to identify threats, including interviews, surveys, and workshops.
2. Categorize Risks
After you’ve identified risks, you need to organize them. Review the most common strategic risk examples or categories, below:
- Market risk is the possibility that your company will lose market share or that the markets you operate in will contract.
- Competitive risk is the threat posed by your competitors.
- Technological risk is the danger that new technologies will render your products or services obsolete.
3. Prioritize Risks
Once you’ve categorized risks, you can start prioritizing them. It would help to prioritize risks based on their likelihood of occurring and their potential impact. Also, account for your business’s unique susceptibility to particular risks.
4. Develop Strategies
After you’ve identified, categorized, and prioritized risks, you can start developing strategies to manage them. When developing risk management strategies, you’ll need to consider what you’re trying to achieve, the available resources, and the risks themselves.
5. Implement Strategies
Once you’ve developed strategies to manage risks, you need to implement them. Execution includes putting controls in place to mitigate risks. Ideally, you do a test run before launching full-scale deployment.
6. Monitor Effectiveness
You also need to measure the performance of your risk management strategies. This includes reviewing risks periodically and making changes to your strategy as needed.
6 Best Practices for Risk Assessment Planning
Creating a plan is the most challenging step in the risk assessment process. It also happens to be one of the most crucial elements of tackling how to manage strategic risk. The specific solutions you choose will depend on the risk factors your organizations face, but there are some general recommendations you can tweak to meet your needs.
1. Create a Strategic Risk Assessment Checklist
There are some crucial elements to keep in mind when completing your assessment. Adding these to your checklist ensures you leave no stone unturned when seeking information regarding risk and your organization:
- Job functions affected by specific types of risk
- The ability of current strategies to prevent risks
- Input from workers regarding risk and strategies
- Technology and operations changes that could reduce risk
2. Leverage Technology
You can use technology to manage risk in several ways. For example, you can use data analytics to identify risks early and use automation to reduce the chances of human error. Staying ahead of technological changes, such as blockchain developments, is another great way to leverage technology rather than be taken for surprise by it.
3. Build a Risk-Aware Culture
Creating a culture that’s aware of risks is essential for managing it effectively. Train your employees on how to identify and report various types of risks. They also need to know that it’s okay to speak up when they see something that could become a problem.
4. Communicate Effectively
It’s essential to communicate with all the stakeholders about your organization’s risks. Stakeholders include shareholders, employees, customers, and suppliers. By keeping everyone in the loop, you can get everyone on board with your risk management strategy.
5. Make It a Team Effort
Risk can occur at all levels of business operations: from janitorial work to board decisions. Treat it accordingly. By getting all hands on deck, you stand a much better chance of reducing risks and mitigating the impact they might have on your business.
6. Make a Note of Trends
If you regularly assess risk, you might notice trends over time. For example, you might only have slip-and-fall accidents during a specific time of year, or one political party might enact policies that benefit your business more.
The Bottom Line
Conducting risk assessments is vital for running a successful business. By identifying your company’s risks, you can develop a plan to mitigate them. While there is no foolproof way to eliminate risk, you can minimize it by following the tips outlined in this blog post.
By taking a proactive approach to risk management, you can protect your business from potential threats and keep it running smoothly. Compared to a purely reactive approach to strategic risk management, this can save you time and money.
