Unseen Yet Inevitable: Navigating Business Risks with Precision
Just as gravity silently exerts its force, risk in the world of business operates in a similar manner — unseen but omnipresent, demanding prudent planning.
The pandemic cast an illuminating spotlight on the concept of risk, leaving businesses of all sizes to grapple with its unforeseen ramifications. As the virus swept through industries, some struggled to stay afloat, while others wrestled with unprecedented customer demand. In a twist of irony, even becoming indispensable posed risks. Just as gravity is an inescapable reality, so too is risk. Therefore, addressing it head-on is not an option, but a necessity.
When businesses effectively manage risks, they arm themselves to tackle a diverse range of situations. “Risk management is designed to empower leaders in making informed decisions promptly,” remarked Josheph Adhikari, underscoring its role as a crucial organizational tool.
Importantly, risk management isn’t about slowing down progress. Rather, as Adhikari emphasized, it’s a strategic aid to achieving organizational objectives. It doesn’t solely provide answers in the form of ‘no’, but rather guides thoughtful responses in the form of ‘yes’.
The essence of proficient risk management lies in a comprehensive understanding of the business’s inner workings, encompassing processes, personnel, and policies. This facilitates the identification of potential risk points and the formulation of responsive strategies.
Among the array of risks, supply chain, third-party, and compliance risks are seen as contenders for the most significant concerns. An executive forum hosted by Sampanna Capital corroborated this sentiment, highlighting the challenges posed by these multifaceted risks.
Maintaining the efficacy of Enterprise Risk Management (ERM) involves more than an initial adaptation. It necessitates accurate risk delineation, uniform processes, effective controls, and secure technology. Above all, it requires a nimble risk management approach that rapidly adapts to the evolving risk landscape.
While the COSO framework remains fundamental for audits and serves as the foundation for many organizations, recognizing the potential gaps where risks reside and adapting risk management practices accordingly is pivotal.
The COSO framework delineates ERM into five core components, each supported by a set of 3–5 practices. Recognizing vulnerabilities within these practices can unearth gaps in a company’s risk management approach, emphasizing the importance of meticulous alignment.
In the intricate dance of business, acknowledging risk’s silent influence is indispensable. Just as gravity shapes the universe, adept risk management shapes the trajectory of organizations, ensuring they navigate uncertainties with precision.
