Creating a risk management strategy
Risk Management Strategy
Risk management has become a critical element within most companies. Every business faces risk. But by identifying the risks and assessing the likelihood and impact of those risks can help companies make cost-effective decisions as to the response they need to take.
This is the case for risks that have positive or negative effects on a company. By managing the type of risks that could have the most impact can help streamline processes, organise response rates and facilitate the reactive action accordingly.
Risk management preparation has a significant effect on the reputation of the company. By integrating a risk management strategy that weighs against the probability of it happening against the impact it could have on the company could help save companies time, costs and resources.
Below are examples of how global enterprises have succeeded or failed in risk preparation:
Central Bank: In February 2016, hackers capitalised on security weaknesses at Bangladesh’s Central Bank and used Dridex malware to hack into the Swift financial communications network stealing $101 million from accounts belonging to the central bank. Miscommunication between the bank and its headquarters, the Federal Reserve Bank of New York, at the time of the hack resulted in the disappearance of most of the money. Clunky payment processes further contributed to the disaster.
The failure of the Bangladeshi government to build adequate safeguards for its financial system became the starting point for a global, multi-million money laundering scheme. The effect of this was felt beyond the country’s borders.
Tesco Bank: In the following November £2.5 million was stolen from 9,000 Tesco Bank customers’ accounts following a data breach. Tesco bank was quick to apologise, refund customers and provide reassurance that personal data was not compromised in the attack. Customers were notified of the breach by email and text messages; and kept updated via the Bank’s website and Twitter page.
Aetna: In July 2017, American managed health care company Aetna exposed the HIV statuses of 12,000 patients by dispatching letters in open window envelopes to their healthcare provider. Immediately providers took to social media showing their support for their customers and their anger at their supplier. Aetna subsequently advised they were considering introducing additional safeguards to prevent further incidents.
Prepare for all risks
Simultaneously, effective risk management preparation can help respond to positive risks in companies; such as an increased demand for a new product or service, introduction of new software, technology or website volume etc. By preparing for ‘opportunities’ as well as ‘uncertainties’ you can affect relationships with customers and your position in the industry.
5 steps to a successful risk management strategy
As the need increases to develop risk management strategies which identify, assess and prepare for positive or negative impacting risks, integrating an effective risk management strategy is stronger than ever. Fundamentally, there are three main factors to consider:
- the risk culture (who is directly and indirectly involved because of a risk);
- engagement of your team (communicating and developing an understanding of the processes involved);
- how you monitor and review the risks identified.
There is no all-encompassing risk management strategy. However, risk assessments and preparation processes can help to manage and deliver effective responses to positive or negative impacting risks.
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