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|Managing the Risks of Change|
Managing the risks of change
Who could honestly say that the world we live in today is the same as it was 10 or even 5 years ago.
The pace of change can often be frightening, but from a business point of view change must be accepted and managed. If this is not done, businesses run the very real risk of being left behind and having their market position eroded.
The essence of risk evaluation lies in examining where a business is exposed to hazards and uncertainties, quantifying the range of potential impacts to the business, and designing programmes to manage the risk.
It is an holistic process which starts by examining every aspect of an enterprise and its business environment. It looks at people and how they work. It considers business practices and their potential effects on the outside world. It looks at the supply chain and potential disruptions. And it quantifies the dangers and costs of business interruption.
Not only is it necessary to examine the immediate risks generated by a business, but an understanding needs to be developed of how other events might have an effect. Processes need to be put in place to identify ways to minimise the effect of risks, and place the business in the best possible position to realise it’s potential in a changing world.
Risk Evaluation in a changing world
Today, in an environment where the conventional measures of corporate wealth are being constantly challenged, the value of a company lies in its ability to differentiate and innovate. The security of intangible assets such as brands and intellectual capital is becoming as important to the sustainability of many businesses as bricks and mortar.
This is leading to a radical change in the relationship between businesses, as critical non-core functions are out-sourced or shared with partners, and companies reconfigure themselves to add value. It calls for a much broader understanding of risks in the new dependencies and the consequences should they fail.
By bringing the wider view of experience from all industry and commercial sectors, good risk evaluation will be able to pinpoint previously discounted hazards and identify ways of dealing with them in the most appropriate way. A clear and accurate appraisal can then be provided, together with viable management strategies to deal with the identified issues.
How can Risk Evaluation help ?
The tightening strictures of corporate governance place growing burdens upon company directors and officers. Not only is it necessary to have a comprehensive approach to risk management, this must also be demonstrated to shareholders, employees, customers, suppliers and the community.
Risk management processes need to be established, implemented and checked, calling for a three-way partnership between risk evaluator, client and auditor. Each brings a specific skill and expertise to bear for a sure and visible demonstration of sound governance.
Risk profiles need to be understood and acted upon. Mechanisms should be put in place to achieve an optimum balance between risk retention and risk transfer.
A customised risk management strategy will help meet the regulators requirements and ensure maximum value is obtained for all parties interested in the business. The business will have the assurance of knowing that it has considered a range of risk and source of solutions systematically.
The benefits of an effective risk evaluation programme can be measured in terms of improved business efficiency, lower rates of absenteeism, more effective employment of capital, lower claims incidence and reduced costs of risk transfer – all of which should have a noticeably beneficial effect on the overall efficiency/profitability of the organisation.
H & H Consulting
Isle of Man
Tel: 07624 493844