“If you don’t invest in risk management, it doesn’t matter what business you are in, it’s a risky business” says Gary Cohn, the famous Investment banker.
Enterprise risk management has become an important consideration in all aspects of business. It helps to seize the opportunities that are an entitlement to any business.
Risk is everywhere. Risk management is painful—not a natural act for humans to perform. The magnitude of risk and frequency of occurrence vary depending on what you are doing and the situation you are in.
Let’s consider a relatively simple event that occurs less frequently but disrupts normal living conditions – a power outage. A power outage of 3 hours in the middle of the day is discomforting for many families but beyond the discomfort that happens for 3 hours in a year or 6 months, it does not cause chaos or loss of much. So families do not consider this a risk to their existence and thereby don’t have a risk management plan. Now, a similar power outage of 3 hours has huge implications for a manufacturing plant that makes automotive parts (as an example). Now, in this day and age of optimized supply chains and just in time inventory, not being able to produce for 3 hours has huge disruptions in the supply chain. Small businesses that don’t think about this as a risk (like family homes) end up not being able to survive as they are deemed as at risk suppliers by their customers in their next scorecard review.
Identifying and assessing risks is something that will require time and should be revisited periodically. So, schedule time in your calendar to identify areas of business risk. Get help from outside sources in identifying areas of risk and create a well thought-out risk management plan. This simple step taken at the right time and with the right approach will insure a smooth and prosperous business.
Business risk scorecards are important tools to monitor the performance of organizations with respect to risk management. The relevance of business scorecards to operations and supply chain management as a means to implement enterprise risk management is vital.
AR2 team members have significant experience in managing business risks across small private to Fortune 100 Companies around the globe. We would like to share our experience and help you realize the true potential of your business.
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