If there's any lesson that has been learned from the global financial meltdown, it is the importance of risk management. So how does this affect private companies? After all, aren't risk management systems the stuff of the financial sector and large corporations?
Not so. With the exception of very small businesses in which owner-operators make all the decisions, having a risk management system is vital to ensuring that everyone in the organization is on the same page. In fact, in the current economic environment, many would argue risk management has become a necessity for most companies. In the post-recession landscape, with the heightened awareness out there on the importance of risk management, it's also likely risk management will play a much bigger role in business success. That means that private companies without a sound risk management process in place could be at a competitive disadvantage.
Effective risk management can help private companies grow on solid footing. That's because a risk management system gives companies contingency plans to deal with sudden risks such as a market downturn or the loss of a major client. But it also provides them with the strategy and methods to carefully assess the risks involved in taking new opportunities and plot their course with the confidence of knowing they are prepared to deal with these.
"Risk management is not just about avoiding or mitigating risk," says Mike Harris, an Advisory Services partner in the Toronto office of PricewaterhouseCoopers LLP who also leads the Canadian Corporate Governance practice. "It's about managing risk, knowing which risks to take. You don't want to become so conservative and so risk averse that you don't take any risks and miss out on growth opportunities."
Know who you are and where you're going
In many ways, risk management is about in-depth awareness and analysis that can help guide you through the road to achieving your business goals.
Identify your true unique risks—don't rely on standard formulas
Weave your risk management process throughout your company
Risk management starts at the top of the company but it is a team effort.
Don't leave for tomorrow what can save you today
Many companies are in survival mode — "holding-on-to-dear-life" mode — without thinking ahead.
|Let's Talk: Not Managing Risk is Risky Business (66 KB)
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