The Reality Based Approach To Risk Mitigation
Mention the term “risk mitigation” in a room filled with CEOs, and many will either turn into an ostrich or a chicken.
The ostrich buries its head in the sand obliviously, hoping that if it does not see trouble, trouble will not find them. They do not worry enough about the complications of risk, even though they are very likely to occur at some point. On the other hand, Chicken Little runs about flapping and squawking hysterically about the very worst happening when the risk is actually quite small.
As a CPHR will tell you, it is best to be a realist when it comes to risk mitigation because every company has its own physical, intellectual and technical vulnerabilities.
Today’s businesses must recognize that they are working within a volatile global environment that is affected by a number of factors beyond the scope of their day-to-day operations. A sudden market crash, cyber hacking, terrorist attack, political turbulence (Presidential tweet, anyone?) or any number of occurrences can drastically drop stock prices and alter the business environment overnight.
There are equally dangerous internal risks too. Finance, supply chain and technology are all areas of vulnerability, as well as a breach of ethics, theft, data security and loss of intellectual property. Basically, if you make a product, sell a service or employ human beings – your company is exposed to a degree or risk.
A CPHR can help you to develop a comprehensive and effective risk management solution. The first step is to understand the extent of your company’s exposure by evaluating and examining the risks to your balance sheet. Ask yourself:
- How much of our net income depends on the strength of other markets?
- Who do we import to? Who do we export to? What are the vulnerabilities in the supply and logistics chains?
- How often do we examine the effectiveness of our safety and quality control procedures?
- What is our hiring process? How well do we screen candidates to ensure their values and ethical decisions fit with our expectations?
- Who has access to our most sensitive information? How well is it protected?
Of course, this is only a starting point. In addition to discussing the risks to your enterprise as a whole, part of the conversation must be centered on talent challenges. Strategic workforce planning, including succession planning and potential future skills gaps, need to be addressed. If you expect to weather an unexpected storm surge, you must have the right talent in the right place at the right time.
By working with a CPHR, your company can become more risk-conscious across the board. As a human resources professional, they are expert in risk management, they understand company culture, and they have access to a large amount of accumulated employee and incident data to support decision-making that will protect and positively impact the sustainability of the company.
This valuable information can be included in developing a comprehensive risk mitigation strategy that includes the following key elements:
Understanding the risk. Traditionally, risk mitigation solutions have been developed at the top and disseminated down through the organization. However, an effective risk audit should include input from people across the all levels of the company who most directly face risk. Your people may alert you to risks that you were not aware of previously.
Keeping the process ongoing. Unfortunately, risk management assessments are done rarely if at all, making processes grow inflexible and outdated with the changing times. In turn, this makes your company much less able to react in a crisis. Revisit all systems, procedures and business policies so that you are able to stay out of your own way when your company needs to rebound and recover quickly.
Taking a holistic view of risk. Look unabashedly at the nature and the extent of the internal and external risks faced by your company, including global influences. A McKinsey Global Survey reported that most executives view the following as having the most impact on their profits over the next five years:
- emerging markets
- labour productivity and talent shortfalls
- the global flow of goods and information
- natural resource management
- the increasing role of government
Do you agree?
Consider and identify which global geopolitical factors, technology advancements and people factors could influence your productivity either directly or indirectly.
In today’s volatile business environment, being able to talk about risk is a healthy part of your strategy. Make a CPHR part of that discussion.