Lots of jargon and concepts practically not applied in our day to day decisions have made people run away from the topic of Enterprise Risk Management rather than come closer. We as humans are more inclined to absorb when things come naturally and this is a humble effort in that direction.
There are four dimensions in which we deal and interact with risk on a daily basis. In order to help businesses achieve their objectives it is important that we ask the right questions to handle the respective situation.Below is the illustration with examples
1- Risk of Being Too Aggressive
Example
- Too much spending on product launch
- Entering simultaneously into various markets
Questions to be addressed
- What’s the worst that can happen
- Are we capable to take the shock
- What’s the best and Is it worth going for the best
2- Risk of being passive
Example
- Not foreseeing what’s coming ahead in the market
- Slow to understanding changes in customers behaviors
Questions to be addressed
- Does organization culture penalize to fail?
- Target setting process; does that keep people in their comfort zone
- Hiring process for top executives. What are the attributes we are looking for?
3- Risk of being complacent
Example
- Customer data leakage
- Penalties from regulators
- Incorrect financial reporting
- Delays in projects
Questions to be addressed
- How the culture of “doing the right thing “is embedded
- Are business objectives only about “increasing sales”, “reducing costs” month on month, quarter on quarter.
- Is there a comprehensive framework of objectives established when a new product is launched, investment is made, employee is hired, vendor is taken on board, activities are outsourced, procurement is made, products are sold, etc
- Are risks and controls against the objectives are defined.
- Are responsibilities assigned for
- executing the controls.
4- Risk of being only Human
Example
- Loss due to fire, war e.t.c
- Epidemic
Questions to be addressed
- Are we comfortable imagining the worst
- Do we plan for contingencies with business continuity at the core
- Are we appropriately covered for any unforeseen event
