Unprecedented Uncertainty Drives Broader Focus on Risk Management
Uncertainty is and always has been the issue of contention for risk managers. But the degree and range of global uncertainty faced by organizations around the world is truly unprecedented. Events that have occurred since the 2001 terrorist attacks point to levels and areas of risk many had never before imagined. Natural disasters, acts of terror, corporate governance scandals, the dot-com collapse, the housing bubble burst—events like these and the uncertainty they have injected into the world have caused organizations to place a greater and broader emphasis on risk management.
More than ever, the focus is on being proactive, instead of reactive.
Pay Attention to Risk or Pay Attention to Extinction
Uncertainty impacts all areas of business and fundamentally changes the assumptions that can be made even as it relates to an organization’s ongoing survival. In his keynote address at the second annual RIMS Enterprise Risk Management (ERM) Conference in San Antonio, author and leadership expert Robert Stevenson emphasized the need to approach risk strategically as a means of not just reducing the chance of losses, but in ensuring the mere survival of an organization. He stated that “future success is not inevitable because of past triumphs.” To illustrate his point, he highlighted these stats:
- Between 1985 and 2000, more than 90 companies have been pushed off the Fortune 500.
- The top 10 employers in 1960 have all completely changed today.
Driving his point home, Stevenson stated,“If you don’t like paying attention to risk, you will hate paying attention to extinction.”
A Harvard Business Review Analytic Survey (HBRAS) report, Risk Management in a Time of Global Uncertainty, addresses this notion of uncertainty by stating that one of the key lessons companies must absorb in their ERM practices is to “look deeper and wider to determine what their most serious risks will be in the long run.” Examining supplier, customer, and partner relationships, and sharpening their view of “cascading” effects are among the approaches companies are using to broaden their risk-related view.
Corporations are also responding with a more strategic approach. 41% of those surveyed in the Harvard study said that since 2009 they have deepened and extended links between risk management and overall company strategy. In doing so, risks are given more weight and attention as they become a strategic enterprise concern.
In the end, while companies are improving their focus and commitment to enterprise risk management, many still have progress to make in adopting a proactive, strategic, and sufficiently broad ERM approach. Uncertainty never goes away and the risk of avoiding risk is simply too great.
We invite you to discuss your enterprise risk management approach with a Lowers Risk Group expert.