Common Errors in Risk Managment
As a discipline, risk management has been around for decades. Its principles are well-established, yet the field is constantly changing with the advancement of technology and new risks emerging from the rapid pace of globalization. A few common mistakes can derail a company’s risk managment, but the good news is that most of these errors are avoidable.
The most common mistake is a failure to establish a clear set of standards and protocols. While building a protocol may take time, it will save time in the long run when staff can use a proven process for identifying, tracking and responding to risks.
Another error is to fail to prioritize. It’s impossible to mitigate every risk that might affect an enterprise, so it’s essential to arrange them in order of likelihood and impact. This ensures that the risks that have the most potential to disrupt business operations are addressed first. The coronavirus crisis is a perfect example of an external threat that quickly escalated from a supply chain issue to a potential existential crisis affecting the health and safety of employees, the ability to interact with customers and corporate reputations.
Lastly, it’s important to communicate the value of risk management to executives. Without this buy-in, it’s difficult to make changes and to get support for initiatives to improve the way an organization addresses risk.
In the past, many organizations have approached risk management with a siloed approach, giving each department or area of the enterprise its own responsibility for managing different types of risk. This approach often fails to consider the relationship between risks or their cumulative impact on operations. It also doesn’t allow for a holistic view of the organization and its risks, according to Shinkman.
To overcome these issues, a risk management program should be comprehensive and include a process for gathering, analyzing and reporting risk information. This should be done across departments and the enterprise to ensure that all aspects of the business are considered, including those outside the organization’s control. It should also address how the business plans to respond to risks and how risk management activities are monitored.
Finally, the plan should include a detailed risk register and include metrics to measure the effectiveness of the program. These metrics might include the number of risks logged, whether they are identified, assessed and responded to, and how many were actually mitigated. This will help the business identify areas where it needs to focus its efforts to improve risk management. It might also provide a useful reference point for future projects and help to ensure that the same errors are not repeated. In addition, a tool like ProjectManager that offers online risk tracking can make this process more efficient by creating a simple way to record and track risks in real time. This includes adding an owner, date and priority to a risk. This will reduce manual effort and help to keep the project on track. Sign up for a free trial of ProjectManager today to see how it can transform your project management.