All businesses today must acknowledge the state of the market in which they are operating and the ways it has evolved to breed risk. Truly, today’s business climate is volatile, uncertain, complex and ambiguous.
Technology has unquestionably empowered companies to innovate quickly. However, new challenges have arisen as a result. Years ago, the cable industry had no legitimate competition, yet services like Netflix have gained rapid momentum and are now used in 40% of households with TV and broadband internet.
With the potential for external and internal risks to arise at an accelerated pace –alongside the risk of “left-field disruptions”— organizations are experimenting with new approaches to foster innovation, obtain a sustaining leadership position and mitigate new risks. However, they still must be careful, because so much is at stake with each business decision made. (An experimental offering can, for example, cause irreparable harm to your business.) As such, it’s time to re-evaluate how your organization operates with respect to balancing risk and opportunity.
It is important to note that no company is immune to the volatile and fluctuating market today. Even on the most successful end of an industry’s spectrum, we are seeing a pattern in which the lifespans and successes of companies on the New York Stock Exchange are shrinking. On the other side, smaller, more nimble companies have mastered momentum – emerging as clear winners, demanding market share and industry attention.
The reason is clear and there is a lesson to be learned. Start-up companies are outliers in the market and institute a fresh way of working. They value customer feedback and create offerings in lock step with emerging expectations, making more effective use of data than older, established organizations. This allows them to take deliberate, calculated risks.
In order to compete, it’s important to create a culture and follow procedures that combine multiple risk management processes to create a new, more nimble and holistic approach to risk management.
Let’s now review some steps your organization can take to achieve the optimum balance of risk and opportunity:
- Embrace the role hierarchies and culture play in operational successes and risk mitigation. New, rapid-pace players – “left field disruptors” in the market – are a risk to your business. However, just as they are able to execute quickly, your organization has the same potential.
Therefore, it’s beneficial to have a balanced view of risk and opportunity, stemming directly from a strong corporate culture, based in a factual and strategic basis rather than anecdotes from yesteryear. This corporate culture allows millennial workers the transparency to understand how their work is related to business objectives, while ensuring that these staff feel empowered with data and technology to make the right decisions about their work without waiting for top-down direction.
Today’s workforce is connected, energetic and eager to make their mark. They are highly networked and relationship oriented. In fact, 55% are connected to 100 people or more through social media, with a tendency to form active communities and a desire to be in control.
Understanding these behaviors reveal ways to best empower, reward and motivate your workforce. This is why many companies are incorporating a flat structure within their organization. This also strengthens transparency and fosters accountability, mitigating risk.
- Rethink the methods implemented to manage third parties with data. Management of third parties, including vendors, introduces uncontrollable external risk factors. If you are reading this, you are likely familiar with many approaches to risk mitigation as it pertains to your extended ecosystem of partners, third parties and vendors. Gaining a holistic, real-time and 360-degree view across this ecosystem requires an organization to make smart use of all internal and external data available.
Undoubtedly, risks stemming from third parties – who are also influenced by market conditions and events – can have a financial and reputational impact on the parent organization. To combat these risks, various functions across the organization must collaborate and make smart decisions based on data.
When all of the functional groups – i.e. audit, risk, compliance and vendor management – are collaborating, sharing information, interpreting incidents and working in tandem, a true, live and beneficial understanding of potential third-party risk can be obtained.
- Scrutinize what’s on the horizon and learn from prior executional stumbles . There are multiple ways to analyze risk as it pertains to learning or planning. Loss events take a look at the history, while a scenario approach provides a long lead view into projections.
In between, an organization can actively measure metrics to provide an accurate view of the current risk landscape. Together, these many types of risk management functions provide a complete picture – although this may not be the most common approach, as it is costly and both time and resource intensive.
There was once a time where you could have a legitimate debate around whether one should invest in the best risk management procedures as a precaution or roll the dice and absorb costs should an unlikely risk occur. In today’s market, this is no longer up for debate.
Each and every company needs a complete, proactive process. This way of operating is not bound to just one industry or company. Rather, all companies today must aim for a complete view of risk when planning and executing operations.
Whether you’re in automobiles or in healthcare – wondering, for example, if a merger for the purpose of tax benefits is the right route for your business – you need to be able to work through the business risk assessment and scrutinize what’s on the horizon. This new holistic risk management process will ensure that while you look at the future and present, you can still exercise hindsight and ask the right questions – e.g., what sort of missteps has your organization (or other companies) had? And how does that affect the health of the company?
Rather than get into a market and scramble to ensure compliance, earn the right to dominate the market by planning for the regulatory compliance, industry standards and internal policy compliance.
- Identify opportunities to foster change through technological experimentation . As part of an effort to find new operational efficiencies, your company should be constantly evaluating new technological resources. You must not only conduct reviews of the latest offerings you see your competitors using but also experiment with tools that are untested. This approach will allow your organization to obtain a competitive advantage, optimizing procedures and mitigating risk across the enterprise.
Create a task force and execute a survey to learn where there are pain points in your organization – and to match them to the latest technological offerings. This will allow you to implement the latest, most powerful and convenient solutions, rather than simply bounding your organization to a chain with the email and program suites of yesteryear.
Applications like Prezi and Slack have completely reimagined the way anyone can present or communicate information, changing the pace and methods in which the workforce can share feedback, ideas and requests – and enabling corporations to execute at the speed of today’s competitive market.
The steps we’ve discussed present a new way of addressing business risk, enabling your organization to obtain a leadership position in a climate that may seem risky and ever-changing but also tremendously exciting. These measures and processes address internal and external risks that may arise, through the lens of the modern, lean, youthful and optimized market challenger – and, in many cases, the leader.
Embracing a new hierarchy and motivational process for today’s workforce enables an organization to unlock the potential of employees by structuring opportunities in a way that speaks to their motivation, habits and goals. Just as business risks evolve and cause you to reassess strategy, the same holds true for your partners. Therefore, reimagining how you collaborate with third parties is an essential step in mitigating associated risks.
All businesses today must have a complete risk assessment strategy, rather than letting upfront cost or resource for implementing a process serve as a deterrent. As technology evolves, businesses that evolve with it will be the ones who are awarded with market leadership.
Disclaimer: The original draft of this blog was published by GARP. You can view the full content here.