No one could have foreseen how 2020 would develop and how we would all, both as individuals and as organizations, deal with one of the most disruptive forces to emerge in the majority of our lifetimes at this time last year. Pandemic was probably not listed on many risk assessment reports as 2019 came to a close, at least not in the United States. Even though vaccinations have begun, there is still a lot of uncertainty about how the COVID-19 pandemic will develop by the time 2021 rolls around. And we all know that business managers detest certainty more than anything else. Given this uncertainty, it is not an easy task to identify the top risks that businesses will need to take into account in the upcoming year, but some organizations have tried. The discussion that follows is based on surveys of executives in risk management, internal audit, finance, and other fields that were conducted by organizations like AuditBoard, the Institute of Internal Auditors, Protiviti, and others. The usual suspects that consistently make lists of the top risks, such as cybersecurity, regulatory risks, and risks resulting from third-party relationships, are among the risks that organizations will have to deal with in 2021. In the upcoming year, risks beyond the peculiar circumstances brought on by the coronavirus crisis and businesses’ responses to it will be on radar screens. The risks associated with COVID, for instance, include mandated business disruptions, supply-chain disruptions, technology security issues brought on by a remote workforce, and more. It’s also true that there will probably be a significant difference between the risks that some organizations face in 2021 compared to others—likely the biggest difference in a while. This refers to the fact that some businesses, like those in the hospitality, transportation, and restaurant sectors, face existential risks as a result of COVID-19 disruptions, whereas businesses in other industries, like those in technology, healthcare, and finance, face entirely different risks and opportunities.
Although uncertainty may not be a specific risk in and of itself, it does make risk assessments more challenging. Even if communities start to bring the pandemic under control, according to survey results published by software platform AuditBoard, the risk landscape will remain significantly amorphous next year rather than returning to more stable pre-pandemic conditions. The research was done as part of the most recent Audit by AuditBoard. The responses highlight the pandemic’s long-term effects on audit and risk professionals’ roles and highlight how crucial these professionals will be in assisting organizations in overcoming risk issues despite gaps in enterprise risk management (ERM) programs.
According to John Reese, senior vice president of marketing at AuditBoard, “Conditions this year have changed drastically due to the pandemic, and audit, risk, and compliance organizations have had to act quickly to adapt to the dynamic risk environment while maintaining operational continuity.” The overwhelming majority of AuditBoard survey responses show how quickly workplace attitudes are changing and how crucial modern audit, risk, and compliance technology has become to support a more remote and connected future. â.
Why do organizations take risks?
Risk-taking is a strategy used by businesses to innovate and grow. When a business launches a new product, it can reduce its risk by studying comparable products, conducting market research, or holding focus groups to find out what its target market wants from the product. However, the company or organization launches their product at a risk because they are unsure of how it will perform. Once a company launches a product, it takes a risk and may need to modify or fix it to meet customer expectations.
For instance, a furniture company might want to market a newly created table. The furniture company may carry out in-depth market research on the type of table they want to make in order to reduce the risk associated with the product launch. They would first research competing products on the market, conduct focus groups to ascertain what their audience wants, and conduct a pricing analysis. With this knowledge, they’ll be more likely to produce a successful product, reducing risk.
What is an organizational risk?
Organizational risk is anything that generates uncertainty within an enterprise. Organizational risk is a concern for business leaders because it directly affects the viability of their company’s finances. Some common examples of organizational risk include:
How to identify organizational risks
To identify organizational risks, you can try these strategies:
1. Conduct a high-level assessment
By conducting a high-level assessment, you can identify the risks to your company that are the most obvious. For instance, natural disasters and reputational damage might be the biggest risks for a neighborhood hardware store. By identifying the greatest risks to your company first, you can later break those risks down into more manageable components.
2. Study similar organizations
Similar organizations to yours have probably carried out their own risk analyses and created plans for them. You can find out what kinds of risks your company might encounter by researching similar businesses. Find some companies that are similar to your own, then do some online research on them. You can evaluate the various strategies they have implemented and attempt to ascertain the risks those strategies are attempting to address. For instance, a company that responds to customer complaints on social media frequently is probably attempting to reduce the risks associated with unsatisfied clients.
3. Gather feedback from others
Getting feedback from others can help you identify additional risks. Some people to talk to include:
For instance, you could pay a risk assessment specialist to evaluate your company. Another choice is to speak with your staff and inquire about potential risks.
When should you reassess risk?
It’s beneficial to review your risk analysis on a regular basis or if your business goes through significant changes. You should conduct another risk assessment, for instance, if you introduce several new products, relocate, or acquire a new business.
How to assess risks
Once you are aware of the risks facing your company, it is critical to assess their likelihood of materializing or their potential effects on the company. To assess your risks, try following these steps:
1. Develop a risk library
A risk library is a repository for all the risks facing your company. In this document, you summarize and define each risk. You also outline your steps for mitigating these risks. Creating a risk library makes it simpler to collaborate with others on your risk assessment because all the necessary information is in one location.
2. Identify a risk manager
A risk manager is in charge of keeping track of each risk. For instance, you might have someone who keeps an eye on your company’s risk of low customer satisfaction while another person is responsible for making sure the company complies with all laws. Delegating responsibility to others through the use of a risk manager enables each person to devote more time to the risk that is assigned to them. You can then consult with risk managers to thoroughly evaluate each risk.
3. Imagine worst-case scenarios
When assessing risk, try imaging the worst-case scenario. Consider what would happen if a certain risk resulted in the worst-case scenario. You can assess the seriousness of a risk by understanding the worst-case scenario. For instance, until a new tool is installed, your company may experience delays if the communication software you use suddenly stops working. Even though dealing with a natural disaster, which in the worst-case scenario could cause your business to suffer a months- or years-long setback, is a serious issue, this one might not be as serious.
4. Determine risk event likelihood
In addition to assessing risk severity, it’s crucial to assess the likelihood that the risk event will materialize. While a business can experience many negative outcomes, some of them are much less likely to occur than others. The most crucial issues to address are those that are likely to occur and have significant ramifications.
Organizational Risk
FAQ
What are the types of risk in an organization?
- Conduct a high-level assessment. By conducting a high-level assessment, you can identify the risks to your company that are the most obvious.
- Study similar organizations. …
- Gather feedback from others.
How do you identify organizational risk?
- Compliance risk. …
- Legal risk. …
- Strategic risk. …
- Reputational risk. …
- Operational risk. …
- Human risk. …
- Security risk. …
- Financial risk.
What is Organisational risk management?
- Break down the big picture. …
- Be pessimistic. …
- Consult an expert. …
- Conduct internal research. …
- Conduct external research. …
- Seek employee feedback regularly. …
- Analyze customer complaints. …
- Use models or software.
What is organizational risk assessment?
The process by which an aid organization evaluates its program intentions in relation to the various risks to the organization, staff, and intended beneficiaries is known as risk management.
