How to improve the practical applicability of risk management

In most companies and organizations in our country, risk management is limited mainly to administrative activity without real useful value.

This is not an exaggeration, but a fact that we have come to discover based on dealing with risk management in medium and large companies over the last ten years.

Therefore, the question of whether and how we can improve this is undoubtedly on point.

In every business activity, there are disturbances that employees are solving daily. Recurrent and increasing disorders can escalate into problems and become crises. The consequences of these crises can be small, significant, substantial or, in extreme cases, catastrophic.

The factors that cause them are internal and external. The internal factors are further divided into business ones, related to processes; technological when they include all types of devices and human when human factors influence them.

A practically applicable risk management system is designed to systematically monitor, reduce and prevent all phenomena that can cause any crisis and limit organizations in achieving their goals.

Therefore, risk management should be part of day-to-day operations in all areas.

How does risk management look like in practice?

Even in large companies, risk management is usually an area handled by individuals or a maximum of a few people. The risks are identified and described in risk registers and evaluated by numerical assessments which obscure their actual significance. What is more, most deal with them once a year, only when a need to check grades and produce reports arises.

We have also noticed that companies are primarily aware of financial risks, which of course are an essential factor, but represent only a part of all risks that can cause crises. Therefore, it is perfectly understandable that in such a way, risk management is not perceived as an area with useful value, but merely a formality.

After the last major crisis, which was a recession more than ten years ago, companies have established mechanisms for stable and successful operations. The years of economic growth, however, were interrupted in the worst possible way by the COVID-19, which also revealed several risks that companies could not foresee or prepare for as they occurred for the first time in recent history.

Therefore, the inventions and risk assessments that were in force at the beginning of the year are no longer valid today and need to be thoroughly overhauled.

Although we most often associate risks and crises with negative phenomena, this is not always the case. They can also be caused by positive effects that have negative consequences.

This is why, in times of crises, some companies have recorded unexpected and rapid growth in demand and orders, which creates a feeling of success and security.

However, as said before, it can also lead to problems and risks with possible minor or significant consequences.

For the mentioned and many other reasons, we are increasingly faced with questions about how to achieve that risk management is practically useful and actually helps you to perceive and prevent various threats.

And this is precisely what we at Silver Bullet Risk are good at, and can offer you guidance in the field of risk management in a variety of ways.

The first step, however, is undoubtedly the awareness that practically applicable risk management is instrumental, and also needed.

If you are interested in assesing the quality of risk management in your company or organization and, above all, how we imrpove its practically applicability for your company, write to us at [email protected].