A Liberty Mutual Insurance survey stated that 68% CFOs acknowledge strategic risk management while 41% do not. Conducting this survey with 152 CFOs revealed that people do not understand how they can realize benefits from it. In this article RM Magazine, Amy Gross and Michael McGowan discuss 6 challenges and 4 remedies of strategic risk management.
Mitigating Barriers to Strategic Risk Management
Though the strategic risk management plan is aligned with your company strategy, you cannot reap the benefits. Internal politics, ignorance of top management, irregular risk analysis, etc. can delay the process. Following are the 6 reasons why you are not realizing strategic risk management benefits:
Resistant Office Culture: 31% of the respondents said that the top management was not ready for the strategic risk management plan. It is necessary that the top decision-makers agree on the risks they are ready to take on.
Misplaced Priorities: 2 out of 5 participants said that the company prioritized business dealings over the plan.
Irregular Risk Analysis: 48% of the respondents said that the company did not regularly analyze risks. Reviewing the strategic risk management plan would give an idea about the actionable to-dos for all kinds of scenarios.
Not Utilizing Insurance: 68% said that insurance reduced company volatility and increased market value. However, only 48% confirmed to have utilized such insurance programs.
Failure to Keep Up with Trends: 34% of respondents acknowledge that it is troublesome to keep up with the newest trends. Sometimes they are taking reactive measures to address risks rather than being proactive.
Unclear Accountability: 56% of the respondents confirmed to have dedicated risk managers. However, strategic risk management is everyone’s responsibility.
- Enable a Culture for Risk Takers: Enable a culture that encourages taking risks up to a reasonable extent by being aware of them. Risk managers should work alongside CFOs to receive top management buy-ins. They should have a team that would work only on this. Involving various departments will help in compiling a combined strategic plan.
- Take Proactive Measures: Prepare your strategic risk management plan ahead of time. With all the possible consequences, you are equipped to handle risks and reduce pitfalls. 48% of the respondents regularly indulge in determining possible results out of best and worst-case situations.
- Be Aware of the Present: It is important that risk managers know current risk trends. To profit from the newest technologies, know the potential risks they pose.
- Realize Benefits from Insurance: 56% said that their insurance programs have provided better ROIs. Employee safety, cybersecurity and data breaches, third-party lawsuits, and regulatory compliance are the focus areas for these programs.
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