Risk management is a discipline that is increasingly important in companies. In fact, almost all organizations like William McFarlane law take it into account in all their areas: finance, IT, human resources, marketing, internal communication, etc. To face them, a key tool: is innovation.
Innovation is important because it allows us to achieve our objectives through the most efficient means. Businesses have been using innovative risk management technology that helps them automate and streamline many parts of the risk management cycle. This helps in multiple ways. It makes it easier for businesses to detect emerging risks while also making it easier for businesses to quickly implement changes to mitigate upcoming risks.
What is strategic risk management?
Through strategic risk management, the sources that cause these risks can be identified, controlled, and eliminated before they begin to affect the fulfillment of the project objectives. Risk always involves:
- Uncertainty: the event that characterizes the risk may or may not occur.
- Potential loss – If the risk becomes a reality, unintended consequences or losses will occur.
To quantify the level of uncertainty and the degree of losses associated with each risk, different categories of risks are analyzed:
Project risks: they affect the timing, cost, and quality of the project. They are used to identify potential budget, calendar, personnel, resource, customer, etc. problems.
Technical risks: they threaten the quality and timing of the software (product) to be produced. With them, possible problems of technical uncertainty, design, implementation, technical obsolescence or cutting-edge technology, interface, verification, and maintenance, etc. are identified.
Five examples of strategic risks and innovative responses
Once the concept of “strategic risk management” has been raised, we give you five very clear examples of how innovation can respond to the changes that organizations face:
1 – Unexpected technological change
These changes occur relatively quickly and cause the internal technologies of companies to quickly become obsolete. How do we respond? Maintaining constant vigilance and having alternatives. It is convenient to collaborate closely with the technology providers themselves, participating in joint projects.
2 – Prolonged market stagnation
These change that, even when they can be seen coming, do not stop catching us by surprise or with little room for maneuver. The innovative response to arrive by being in permanent contact with customers to generate innovations on-demand, associated with new perceptions or emerging needs. In addition, it is also achieved by jointly designing and establishing joint projects with clients and large consumers.
3 – New aggressive and high-level competitor
This risk is constant, even when we are not aware of it. Sometimes when we find out, it may already be too late. It is tackled by having a Competitive Surveillance system and having a Business Model plan B. A new line of the same product can also be launched, with a process improvement plan that allows it to be competitive.
4 – Changes in customer priorities
it is a risk that may be associated with previous risks (technological changes or stagnation caused by the crisis) but that threatens the overall strategy of the company. It is prevented by acting on the previous three risks simultaneously.
5 – Failure in a new launch
sometimes and to stay in the market or overcome a risk from the previous ones, we carry out a new project that involves the launch of a new product/service as a lifeline. For it to be a success, it is convenient to have several projects always running and that overlap in time.
Innovation must be the basis of Risk Management since, otherwise, new risks will be superimposed by not changing the horizon of vision that innovation implies. Like any other innovation project, it will be necessary to identify the risks, quantify them, have an action plan, and make decisions.
Risk management technology can help businesses utilize the power of artificial intelligence to detect emerging risks. A.I. powered risk technology automatically monitors the most important risk metrics and then notifies businesses about any concerning factors. This ensures that businesses do not ignore any risks that may threaten their very existence.
Things may seem to be a bit daunting for businesses right now as the economy reopens after the pandemic. They will need all the help they can get, and risk intelligence is an important part of the help that they need. Therefore, businesses are increasingly using technology not just to manage risks but ensure compliance management as well.
Another important factor that is increasing interest in risk technology is its rapidly decreasing price tag. A couple of years ago risk management solutions would cost businesses millions of dollars. Now there are cloud-based solutions that can be procured and implemented at a fraction of the cost of the older solutions. Cloud solutions can also be easily trialed before implementation, which ensures that businesses can estimate the ROI of an implementation beforehand.