Looking at risk through a more objective lens can help organizations identify and address risks before they become threats. In other words, it may be more advantageous to view risk as an opportunity rather than a problem.
Risk Management Basics
Effective risk management is a core concern for companies of all sizes – as well as their regulators, customers, and other key stakeholders. As technology evolves and the business world becomes data-centric, even the most proactive companies are finding it challenging to stay in front of the threats to corporate assets, data, and long-term success.
Many small to medium-size organizations are seeing the benefits of formalizing their risk management procedures. A well-defined process helps organizations effectively deal with rising complexity, alleviate stakeholder concerns, and clear hurdles to business success. As such, the risk management process often includes the following steps.
- Define strategic objectives and risk appetite. Risk cannot be managed without first defining objectives and risk appetite. Strategic objectives typically fall into three main categories:
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Risk appetite is the amount of risk an entity is prepared to accept to meet its strategic objectives. It is the starting point for risk management. Without a defined risk appetite, there are no boundaries within which to manage risk.
- Pinpoint risks. Once an entity defines objectives, it can then identify the potential risks of achieving them. By first defining their goals, organizations can properly assess the threats that may compromise those goals and pursue strategies that align with their risk appetite.
- Implement controls and processes to mitigate risks. The next step is to define and enact controls and processes that provide reasonable assurance that the company will achieve its strategic objectives. Such measures should be designed to mitigate risk to a level that aligns with the company’s risk appetite.
- Assess and monitor risks and controls. Organizations should continually observe controls and risks to help ensure their effectiveness. This step typically involves ongoing internal or external evaluations to assess whether controls are effective and appropriately designed to address the identified risks.
CRI’s Risk Management Solution
Risk management is a continuous process. As business environments change, so do risks. Companies should implement a formal process to maintain a proactive approach to risk management. Doing so will likely help proactively uncover threats and opportunities — and be better equipped to respond appropriately.
CRI’s comprehensive suite of governance and risk management services can address all four steps of the risk management process. Additionally, we tailor our services to help you meet your most critical needs. Contact us to learn more about how to view risk more positively and define a process that can help turn risk into an opportunity for your organization.