Identifying all the risks which may impact your organisation may be difficult. Unforeseeable risks may impact your business at any time. The consequences of being unprepared can be extreme. Disruption, in its widest form, is not about to disappear.
Any successful organisation knows that managing risks and the impacts of disruption is critical. As an organisation, you would want to do this within a well-defined risk management structure. Effective risk management provides the frameworks, mindset and culture to look towards your future with confidence and clarity.
Well planned and tested risk management practices generate extraordinary value-added for your business.
Governance Structure and Risk Management Framework
The initial stage for applying effective risk management is to establish a governance structure which distinguishes between the executive and monitoring roles.
Organisations need to set their risk management framework which, will not only determine the risk management process, but also establishes the required protocols for enabling risk communication and the sharing of risk information. The framework assigns also the different roles required to ensure a best-practice risk management process.
The Risk Management Process
Once the governance structure and risk management framework are determined, organisations will then be led into applying a risk management process and embedding it into their core business processes. This includes:
- Establishing the organization’s risk profile based on its external and internal environment;
- Identifying the organization’s risk universe using applicable risk identification techniques;
- Identifying, analyzing, and documenting risk controls;
- Assessing risks using applicable risk assessment techniques;
- Determining the organization’s risk appetite;
- Evaluating risks based on the organization’s risk appetite;
- Monitoring the organization’s risk profile; and
- Reporting on risk related matters, both internally and externally.
Management are constantly required to compile reports that reflect their organization’s risk profile which are presented for internal or external consumption.
There are various methods and techniques on how risk information can be reported internally, depending on who the stakeholders are: the board, management, specific departments, for example.
External risk reporting to external stakeholders might also be required, with examples of recipients including regulators, potential investors, suppliers and/or customers.
We are here to help by advising on which techniques can be used to make sure the reports include the required risk information.
Business Continuity Planning
Applying effective risk management within an organization needs to be complemented with the implementation of a holistic and well-tested business continuity plan which ensures the continuity of operations, or recovery thereof, in a determined recovery time objective. Business continuity management is crucial for organisations as this ensures they are prepared for any disruptions, hence minimizing the potential impact on their core business processes.
Business continuity plans are not found on shelves as part of standard packages for organisations. They need to reflect the organization’s structure, resources, nature, size, and complexity. It is for this reason that a complete business continuity plan needs to be compiled as a result of a business impact assessment and a risk assessment which determine the organization’s critical functions, significant risks, the required resources and the minimum recovery time objectives.
Independent Advice from BDO
Organisations are required to manage their risk profile to protect themselves from threats which may affect their interests and objectives, their market share, and their future perspectives.
BDO is here to help.
We do not merely see “more controls are required” or “risks need to be mitigated further” as the answer to every question. We take a broader look and consider the business environment as well as its requirements when recommending or implementing solutions.
If you would like to learn more about how BDO Malta can help your business, contact us today on [email protected] or get in touch here:
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