Risk Management

How Risk Management Leads to Increased Profit Margins

What if every time you successfully managed a risk, somebody dropped out of the ceiling to hand you fifty bucks? You would probably be a risk-deflecting machine. Well, on a much grander scale, this actually is what happens when CIOs (and the rest of the company leaders) manage risks. This is according to new findings from PwC which correlate good organizational risk management with better growth and increased revenue. Thor Olavsrud reports on these findings for CIO.com.

Less Risk, Mo’ Money

There are four ways that risk leaders set themselves apart from their peers and help guide business strategy. The first is that they understand how risks interconnect and impact business. They can see the ways that risks snowball into avalanches, and they understand how risks might coalesce and can pivot to avoid these collisions accordingly. The second thing is that, because risk managers understand risk so well, they are more willing to take risks themselves. In fact, almost 90 percent of risk leaders in the PwC survey say they are “increasingly taking a risk-enabled approach to growth.” You could say that they are more prone to risk literally because they have already “de-risked” some of the situation by understanding risks from so many angles.

Such knowledge is how, in the third point, risk leaders are able to better align strategy across business units. And lastly, risk leaders have access to more sophisticated techniques:

PwC found that 46 percent of risk management leaders spend more time calculating and preparing for risk than reacting to it, as compared with 21 percent of non-leaders. Risk leaders also use a variety of tools, including identification and forecasting of emerging risks (96 percent vs. 59 percent), horizon scanning and early-warning indicators (81 percent vs. 33 percent) and building organizational resilience to risk (88 percent vs. 42 percent).

You can read the original article here: http://www.cio.com/article/2910231/risk-management/how-risk-management-leads-to-increased-profit-margins.html

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