PrintEvery business has associated risks; none is immune, nor is any capable of eliminating them. If not addressed, risks can have a detrimental impact on business and financial performance. The good news is that risks can be identified and pre-emptively managed. The degree to which you can identify and develop plans to deal with risk is paramount to survival and growth.
Many companies are beginning to realize the impact these risks can have not only on their bottom line but on other areas that affect operations. As a result, risk management has become a key facet of management. According to a report from Ernst & Young, which surveyed 507 C-suite and board level executives in global companies across multiple industry sectors, 96 percent of organizations believe they can improve risk management; and 50 percent say committing resources to risk management could actually drive a competitive edge. The first step in risk management is identifying the range of potential risks your company faces. Why is this important? Once identified, risk threats can be dealt with by avoidance, transference/insurance, absorbance or specialized management, according to the needs of the business. Understanding the range of potential risks also creates opportunities to make or save money, to improve relationships with people important to your business, and to build a reputation for being a stable and consistent organization. Most risk threats vary according to industry. For instance, businesses that manufacture chemicals have environmental concerns that financial service firms do not face. Retail operations have customer safety issues that oil and gas drilling companies do not share, while medical facilities share few specific concerns with cargo shipping firms. Once management can identify and make decisions whether to avoid, transfer or manage known risk, solutions and strategies can be developed. Cohesive risk control involves not only insurance company loss control, personnel, and risk consultants, but spreads through the organization and involves key people in finance, operations management, facilities management, human resources, fleet management, information technology and other departments. Properly implemented, risk management is no longer the concern of one or two company employees, but a conscious concern for everyone part of the "company fabric." Identifying and managing risk also involves reducing operational and administrative expense; it is a fundamental business expense that must be budgeted. In today's economy, that requires some tough decisions. According to the Ernst & Young survey, 61 percent of organizations admit they won't commit more resources to risk management over the next 12 to 24 months. But even with tougher economic conditions and possibly because of them leading corporations in all industries are now integrating risk management into their entire organizations. Here is a key question to ask when you are performing a risk audit: Do you view risk control as a necessary evil or as a competitive advantage? For many, this is a confusing question because it's hard to fully appreciate the time and effort it takes to implement long-term control strategies. Those who do have risk management programs know how difficult it is to instill an enterprise-wide culture. But they also know how invaluable the program becomes a competitive weapon that is not easily emulated. So while risk is a constant, risk is not stagnant. It is fluid, changing and evolving with the advent of new technology, new products and processes, and new laws and regulations. Well-governed businesses that have developed proactive programs to deal with risk exposures will excel, while those that ignore the impact of risk put themselves in danger of failing.
Jeff Holmes is a principal of The Holmes Organisation, a Tulsa-based independent insurance agency focused on providing insurance and risk management services to middle- and upper-tier commercial accounts. The views expressed here are those of the author and not necessarily the Tulsa World. To inquire about writing a Business Viewpoint column, e-mail a short outline of the article to Business Editor John Stancavage at john.stancavage@tulsaworld.com The column should focus on a business trend; the outlook for the city, state or an industry; or a topic of interest in an area of the writer's expertise. Articles should not promote a business or be overly political in nature., Jeff Holmes, get, Jeff Holmes mug from e-mail for Business Viewpoint logo