7 Important Risk Management Factors

The complexity and importance of risk management has only increased with time and multiple factors have played a part in this increase. There was a recent survey which asked risk experts about their experience with risks and how it is changing with time; it is a great source for information on not just how risks are changing, but also how risk management process is among risk experts. There are many great insights in this survey which will explain the current state of risk management in enterprises. 

It is also critical to understand the most pressing issues being faced in the risk management domain. Understanding these issues is the key to enabling transformative risk management practices. Many businesses are using technology to opt for a digital risk transformation too. This strategy has proven to be a successful one. The cost of risk technology has decreased drastically over the past decade while its usefulness and ease of use have increased drastically, making it an obvious strategy for any business that quickly wants to improve the way it manages risks. 

1. The number of risks and their complexity grows 

A study revealed that according to 59% of those surveyed, the number of risks and their complexity has increased during the last five years. The main concern has to do with the ability of organizations to generate leaders and retain talent, although the impact of the economy, technological innovations and consumer demographic changes are also mentioned as reasons for concern. 

As technology advances, businesses adapt new strategies using those technologies. This increases the complexity of business processes, which also increases the complexities of managing risks. There is therefore a need for better risk management tools that can deliver faster and better risk mitigation and management features. 

2. The appearance of "operational surprises" 

An “operational surprise” corresponds to the effect that an organization suffers from the occurrence of a risk that was not considered in the identification process. The reasons can be several. But what is interesting is how repetitive the phenomenon is:  68% of those surveyed state that their organizations were affected, in the 5-year period considered in the study, by an “operational surprise”. 

The immediate cause that explains this situation is a poor risk assessment or the absence of it. But if we dig deeper into the practical solutions, it is clear that knowing the   most appropriate methods and tools for an effective risk identification and assessment is essential to face it more successfully. Therefore, specialized training programs that provide training in these aspects are essential. 

3. Organizations need mature and robust risk management systems 

Only 23% of those surveyed consider that their risk management systems have reached maturity and can be classified as robust. It is an indicator that shows the lack of   specialized risk professionals who have the appropriate knowledge and resources to implement and develop a system to its highest level. 

4. Third parties demand good business risk management 

Suppliers, clients, investors, partners, regulatory bodies, among others, demand effective actions from organizations to prevent or eliminate risks. This is stated by 59% of those surveyed. 

Investing in the area of risk management is, of course, the way to go to achieve that effectiveness that meets third parties.