Disruptions in today’s business environment will occur due to a myriad of reasons such as global events, natural disasters, regulatory uncertainty, and technological advancements to name a few. To ensure the appropriate response to such events, a company’s risk management program must be resilient – react, respond, and recover as rapidly as possible.
Risk velocity, the time between notice of the event and its impact on the business, has increased significantly over the last decade. Businesses must be prepared. This begins with a strong risk management plan with the ability to recover from and or adjust quickly to the impacting event. Although building resilience can be challenging, there are strategies that risk leaders can use to ensure their business can bounce back from disruption.
Know the business
Resilience planning means fortifying and mobilizing business resources so that core operations will continue during disruption. This requires a strong pulse on business resources and operations. To do this, risk leaders should proactively map out key aspects of their business, like essential functions, teams and potential risks, and outline the current processes in place to combat these risks.
As part of understanding the business, risk leaders should utilize data to track trends and determine how past stress or loss events have affected it. Risk data provides clear insights, making it an effective tool for getting other leaders to understand how risks impact core business decisions.
Get executive-level buy-in
Risk events impact the entire business, so every leader has a responsibility to understand and help manage them. To steer the business toward resilience, risk leaders should have regular conversations with other leaders, C-suite executives and board members about risk. Asking questions like “What does risk mean to your area of the business?” or “If a risk event happens, how would it impact your team?” can ensure that everyone is risk-aware and help incorporate the broader business into decision-making.
Thoroughly evaluate risk
While it’s important to understand the business and impact of past disruptions, it doesn’t paint the full picture. To thoroughly evaluate risks and their impact, risk leaders should use strategies like risk reporting and actuarial analysis and consider things like risk appetite and tolerance, financial impact of risk and predictability for different risk events. Combining these elements will help create a comprehensive risk management plan that builds resilience.
Refine the plan
Lastly, it’s important for risk leaders to continuously reflect on their plan’s results so they can continue strengthening it over time. Were risk expectations met, exceeded or missed over the year? How did risks compare to projections at the start of the year? How did risks impact the business overall? Answering questions like these and sharing the results with other leaders is crucial to maintaining a strong risk management plan that builds resilience.
When risk leaders understand their business, get buy-in from leadership, thoroughly evaluate risk and continuously refine their risk management plan, they will be prepared to help their businesses recover from disruptions when they occur.
At Sedgwick, we’re here to help you navigate the unexpected. Our global solutions can help you build resilience and keep your operations moving forward. Learn more here.
Tags: recovery, resilience, Risk, Risk management