The role of risk managers has been painted as a positive picture since the pandemic struck, but which, however, requires a continuous focus on particular areas as organizations tentatively enter the recovery stage.
The pandemic has brought into sharp focus both the upsides and downsides of risk management, from staffing, technology, and supply chain to fulfilment.
Many organisations will, in most probability, experience significantly higher levels of people risk in the next few years, whether in shortages of skilled workers, people opting out of their current jobs, burnout or exhaustion, mental wellbeing challenges, the ongoing health crisis of Covid-related illnesses, and other conditions that have not been treated because of pressure on health systems.
None of the existing risks that organizations were managing disappeared in 2020 and 2021. These risks still need just as much attention, if not more. The increase in cybercrime, for example, has been notable, perhaps in part fuelled by remote working. More so, we should not allow the magnitude of the current crisis to obscure the other major, and interconnected, risks we all face. Risk managers are still required to keep focus on horizon risks, such as climate change and the impact of economic and geopolitical volatility. Given all these challenges, organizations need to ensure they have a robust risk culture enabled by highly skilled professional risk managers. This might prove to be the most worthwhile investment.
Most boards heavily focus on their organization’s external context and thinking about what this might mean for their planning. Most business plans start with an extrapolation from current financial results but given the disruption of the past 18 months, boards need to think again about what the baseline for business performance will look like and how external uncertainty, such as geopolitical risk, inflation expectations, and post-Covid recovery, changes both risks and opportunities.
Risk managers’ contribution to this should be focused not only on the risks associated with delivering a business forecast and hitting financial targets, but also on how the market is changing in the long-term. Strategic risk managers can make a real difference by helping boards understand and respond to the rapidly changing and uncertain external economic environment in a way that facilitates opportunity as well as mitigating downside.
The risks in organizations’ supply chains have been ruthlessly exposed by recent events and the challenges of supply chain resilience are having a global impact. The underlying risks were always there in supply chains. However, we are now seeing a lack of resilience when these are put under pressure. As a consequence, while organizations are heavily focused on managing these risks, supply chain risk is being raised to higher levels on many risk registers and integrated as part of the overall risk strategy.
Boards are now taking strategic and enterprise-wide risk management seriously, even though organizations have different levels of risk maturity, and some are better placed to manage these unfolding opportunities and threats. The challenge to risk managers is to step into this strategic space for the long term and to embrace a holistic, system-wide view of business risks.
For risk managers, the job is increasingly about getting an organisation’s risk culture to a place where it improves an organisation’s capability to respond to unforeseen events and global uncertainty. This requires a sharp focus on strategic risk management, sustainability, and resilience.
Rising to this challenge goes well beyond traditional risk management approaches, with a focus on risk registers and core processes. Great risk management is increasingly also about understanding horizon threats and identifying ways to build sustainable growth, whether this being new markets, global opportunities, upgrading infrastructure or investing in new technology and automation.
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