4 x why integrated risk management is important

If there is a time when it is clear that risk management is important for any organisation, it is the present time. The health and hazard challenges we face today are recognisable to all.

There is a fairly simple formula behind the word ‘risk’. It is the probability of something happening, times the effect it has when it actually happens. Private but certainly also business, from small organisations and sole traders to the big world leaders: everyone deals with risk in their own way. Within companies, it is important to tackle risk in a thorough way, with everyone contributing to managing risk.

We give you 4 reasons why risk management should have a prominent, integral place within your organisation.

1. Ignoring risks means stagnation

If you want to grow as a company, you have to push the boundaries of what you know. This means consciously taking certain risks. When an experiment fails, you can use this moment to learn from it.

Example: when an athlete wants to perform, limits will have to be pushed. One can use new insights or methods, deliberately taking risks. It has not yet been proven that these new insights or methods will actually work. But the growth may just be worth it.

Successful organisations have their risk analyses in order, and therefore know what risks to take to achieve growth. In addition, they have the controls in place for risk management.

In today’s VUCA world, managing risk is a must.

2. More complexity causes more risk

The world is becoming increasingly complex, and with it the processes we work with. More complexity also means more risk. Getting a good insight into all the risks surrounding complex processes requires expert and multidisciplinary consultation.

A lot of complexity calls for a thorough, solid risk management process, but also for actively investing in risk management within the organisation. You can do this, for example, by using integral risk management software such as Zenya RISK, where you can easily share the risk register with others, for example.

3. Ignoring risks is not cost-effective

There is always a tension between the cost of managing risk and setting up an organisation as efficiently as possible to optimise profits, for example. The focus is often on short-term returns. One prefers to continue as it was already going, because from that the costs but also the profits can be predicted.

Actively investing risk management within your organisation becomes cost-effective in the long term. You first have to invest in your processes, the system and the software you want to use to do this. But after that, when the goals are actually achieved – such as optimising profits – only then does it become clear what it was all done for. And this is also the moment when risk management starts saving as well as delivering.

4. Talking about it is sometimes difficult, but necessary

Risk management can be a difficult topic to talk about, because it is usually about uncertainties. Yet it is important not to shy away from this conversation. Take the following examples:

1. KNMI issues a weather alarm. There is a chance of extreme weather. If the damage after extreme weather is not as bad as expected, this can be interpreted in two ways. Was it not so bad in hindsight because the storm was not that bad, or did we simply assess the risks correctly and take the right measures?
2. A fire alarm regularly goes off for no reason. After a few times, many people do not react, let alone evacuate. What happens when a fire really breaks out? How can the risk that nobody takes it seriously anymore be managed?
3. A virological pandemic, such as Corona, breaks out. Could anyone have foreseen in 2019 that we would all be locked in March 2020 because of a virus? And yet it happened. In what ways can we prevent it in the future?

You see; you can’t just ignore risks. They can have a big impact if not dealt with. This makes talking about risks important, and the question of good risk management very relevant.