Due to the many different facets of today’s business environment, businesses worldwide have been confronted with a substantial increase in risk-related challenges. The 2008 and 2009 economic downturn has forced companies to feel pressed for time when redefining their business priorities and strategies. Looking back on these years, many companies believe that if they only had known earlier that the economy was changing, they could have had more time to prepare themselves for the conditions they currently face. Most companies have learned the hard way about the importance of reducing risk detection and reaction time for the success of their businesses. A recent article by Ernst and Young, examines how organizations can reduce their risk detection and reaction times in order to gain value and competitive advantage. Their advice is applicable during any economic condition as risks arise constantly in our global, fast-changing, competitive world.
Many companies currently do not have the same risk management language throughout their organization. This contributes to a slower detection and reaction time for these companies, which ultimately results in higher risks that can negatively affect their businesses. Many companies have not clearly defined what their main risks are. These actions may create vertical separation between the different business units within an organization. This vertical separation has caused each different business unit to view and act on risks through their own perspectives about what risks are important. Also, many companies have horizontal separation, as managers from different hierarchical layers have different views on the company’s risks. Unfortunately, the lack of communication regarding a company’s risks has caused many companies to become less competitive.
This thought paper provides some key ways for a company to correct these risk management issues in order to reduce risk detection and reaction time, which can provide reduced risk and greater opportunity for a company. The key ways to shortening risk detection and reaction time that will eliminate the barriers to timely and efficient risk management efforts are:
- Use the same risk “language” throughout the entire organization.
- Company-wide definitions should be established, shared, and continuously updated. .
- Risk management procedures and communication channels need to be clearly defined.
- Communication needs to occur both vertically and horizontally to ensure everyone in the organization is aware of the company’s risks and their priority.
Click below to download thought paper.