Four reasons to prioritise integrated risk management

Risk management is important for any organisation. One reason for this is the VUCA world we live in – we live in an age where the world is rapidly changing. The health and hazard challenges we face today are recognisable to all. Here are four reasons why effective risk management should have a prominent, integral place within your organisation.

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

1. Ignoring risks means stagnation

If you want to grow as an organisation, 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, consciously 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 assessments in place and therefore know what risks to take in order to grow. They also have risk management controls in place.

In today’s VUCA world, managing risk is a must. VUCA stands for Volatile, Uncertain, Complex and Ambiguous. This means that we live in a world subject to rapid change. As an organisation, you therefore need to be agile. Map out the types of risks for your organisation and create order out of chaos.

Effective risk management and risk control is necessary because of the VUCA world we live in.

2. More complexity requires effective risk management

The (VUCA) world is becoming increasingly complex, and therefore also the processes we work with and on. More complexity also means more risk or the likelihood of an uncertain event. Identifying risks around complex processes requires expert and multidisciplinary consultation.

A lot of complexity requires a thorough, solid risk management process, but also the active investment of risk management within the organisation. One way to do this is by using risk management software such as Zenya RISK, where you can easily for example, share the risk register with others.

The idea behind RISK is that you do risk management together – it is something that needs to be supported by the whole organisation. It is precisely the people on the work floor who can provide valuable input and increase the value of integrated risk management (IRM).

Thanks to an up-to-date risk management system such as Zenya RISK:

3. Risk management is cost-efficient

There is always tension between the costs involved in risk management and setting up an organisation as efficiently as possible to optimise profits, for instance. People often look at short-term returns. People like to do things the way they have always done them, because that way costs and 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 only when the goals are actually achieved – such as optimising profits – does it become clear what it was all done for and this is also the moment when risk management starts saving and delivering.

4. Talking about risk management is sometimes difficult, but necessary

Risk management can be a difficult topic of conversation, as it is usually about uncertainties. Yet it is important not to avoid this conversation.

Here are a few examples that show how important this is.

• KNMI issues a weather alarm: there is a chance of extreme weather. When the damage after extreme weather is not that bad, you can interpret this in two ways. Was it not so bad in hindsight because the storm was not that bad, or did we simply assess the risks well and take the right measures?
• A fire alarm regularly goes off for no reason. After a few times, many people stop reacting, let alone evacuating. What happens when a fire really breaks out? How can the risk that nobody takes it seriously anymore be managed?
• A virological pandemic, such as corona, breaks out. Could anyone have foreseen in 2019 that almost the entire world would go into lockdown in March 2020 because of a virus? And yet it happened. In what ways can we prevent it in the future?

Here you see: you cannot just ignore risks. They can have an immense impact if you ignore them. This makes talking about risks important, and the question of good risk management very relevant.