Business risk management: Ensure business continuity with business risk management
Business risk management has always been a central part of business strategy and corporate governance. And in today's world where information travels instantly irrespective of geography, where trade is globalized and where consumers are increasingly vocal, business risk management is more important than ever before. Any crisis now has the potential to very quickly be devastating for a business.
Crises can take many shapes and forms, meaning that business risk management requires proper analysis and planning of all potential scenarios. These may include:
Political risks: Business risk management should identify the potential geographies where business continuity may be at risk for political reasons. These risks may be related to social unrest as much as to international political tensions. In such crises, business risk management involves the stakeholder management team to ensure that the company does not become associated with any political tension.
Economic risks: Business risk management needs to analyze the various economic risks facing a business. These may range from increases in commodity prices to an economic downturn. In these instances business risk management allows companies to have an appropriate plan already in place that may include, for example, a revised pricing strategy or a new product offering.
Product-related risks: Business risk management will obviously address issues such as product recalls or malfunctions. This type of business risk management is critical as consequences are both reputational and financial. For example, a product recall will have lasting consequences on the trust consumers have in a brand and its products. Once sales are lost this will have a clear impact on a company's bottom line.
Safety risks: Depending on the sector and product, business risk management may need to deal with health and safety issues, environmental risks and various other hazards.
Competitive risks: Understanding what competitors may put on the market is also a part of business risk management. In this case, the business intelligence unit should work in close cooperation with the marketing and R&D teams to ensure that a market response is ready should such a situation arise.
Financial risks: Financial crises may include from governance issues, misconduct or inappropriate investments.
Succession risks: One aspect of business risk management that is too often neglected is succession planning. All companies, not matter what the size, should implement an ongoing succession planning process to ensure business continuity in the face of the planned or unexpected departure of all key personnel.
In all cases, the key to successful business risk management is to ensure that all employees understand the various issues they may face and know how to quickly respond to them. Practical responses and crisis procedures should be tested via real-life crisis scenarios involving all relevant departments.
An overarching requirement is that business risk management is embedded into all business strategies and processes, and supported by senior management. In this context, management training that includes business risk management can be extremely beneficial. Such training across the company helps bring a common approach to plans and processes - so ensuring the success of business risk management.