Having talked in previous posts as to why it’s important, and today how accessible it is for any size of organisation to adopt a healthy approach to risk, I’ll now take you through my top ten tips on how you can maximize your risk management programme:
1. Get buy-in
Risk management is not an optional extra. It is a business critical tool that is an asset and an integral part of the project. The company culture must be developed to embrace QRM (quantitative risk management) and DMU (decision making under uncertainty) in order that everyone understands their benefits and therefore accepts the need for them.
2. Get budget
Business tools cost money, but managing risk is an investment – not an overhead – and must be regarded as such. Allocating resource and making it a formal business process should be seen as an insurance policy. Not only will it help organisations make better decisions that will save them money in the long term but, by identifying potential risks and adverse events, it can protect them against unexpected costs in the future.
3. Get words
As with any organisational change, it is essential that everyone is clear on the new processes. Therefore a common risk language – or ‘glossary’ – needs to be developed to avoid misunderstanding and to ensure a consistent approach to QRM and DMU.
4. Get numbers
Qualitative assessment is essential, but numbers are more powerful – for example the percentage chance of meeting a deadline or budget. Monte Carlo simulation random sampling provides the margin of error for a venture and is a good way to illustrate the consequences of different courses of action. Risk management experts must ensure everyone understands these figures, and accepts them.
5. Get structure
Managing risk in order to make better-informed decisions requires an appropriate organisational structure. Individuals and groups need clearly defined roles, and must then each take responsibility for their own area of expertise.
6. Get lateral
Every organisation has risks that it deals with on a daily basis and which must therefore be factored in to the decision-making model. However, no enterprise operates in isolation, so other external variables must be included. For example, even a small rise in fuel costs could have a major effect on revenues if raw materials need transporting long distances.
7. Get perspective
Political, cultural and social risk factors can be explored by involving all stakeholders. Investing time and money in consultation and research ensures that businesses have a clear idea of the complete environment in which they operate, and therefore minimise the chances of products and services failing.
8. Get reporting
Risks, and the management of them, must be reviewed regularly – and the programme amended if necessary. This requires a regular reporting process, in which risks are clearly identified and prioritised.
9. Get with it
Being risk aware does not mean being risk averse. Businesses should guard against rigidly adhering to ‘the way we’ve always done it’ approach, instead keeping up-to-date, learning new tricks and not being afraid to be bold. Although risky on the surface, these tactics prevent being left behind – much of the potentially uncertainty can also be removed with QRM and DMU.
10. Get it documented
Back up the commitment to a thorough QRM and DMU programme with documentation. This validates the budget and buy-in requested at the start. And it’s good for business – organisations this thorough are guaranteed a competitive edge.
EMEA Managing Director of Risk & Decision Analysis