Risk Management Goals

We will never know how many businesses with world beating ideas, innovative production techniques and life changing talent have never arrived to their full market potential. A tough statistical fact is most companies stop within their first 3 operational years and a great deal of business leaders fade to closure (think Kodak). Part of the cause to these tales of woe is through vision, market analysis but most could avoid their closure through robust and good risk management goal setting.

Calculating the price of risk

The organizations vision may indicate a character of risk within the business culture. We see this when comparing Nike, Virgin, Tesla and GE to companies such as Lockheed, JP Morgan, and IKEA. It remains important to engage with the leadership to understand, what the level of risk profile is and vision the business wishes to be engaged in over the next 3 years. From this starting point it become possible to help define objectives and goals within risk management.

“What we anticipate seldom occurs, what we least expected generally happens.

— Benjamin Disraeli

A vision can be aspirational, motivational and portray desired behavior states. The actual goals and objectives should be defined where possible in SMARTER terms (see my prior blog on SMARTER definition). The necessary resources should be reflected within the strategy and tactics to allow the desired level of business performance.

The key elements of risk management goals and objectives should cover at least the below check point areas for your business:

• What are our specific business objectives for the next 36 months?
• How often do we change our business strategy or business ownership?
• What are the exact financial targets, e.g., profitability, turnover in specific markets?
• What marketing brand values do we want to build and reinforce?
• What specific markets do we choose to operate within?
• What relative market leadership or growth ranking do we want?
• What is our business model for winning in our chosen markets?
• What is the talent pool within the business and operations environment to bring us to our goal?
• What specific possible future event types do we face?
• What is the band of sensitivity to our strategies, markets, turnover and cash flow to the occurrence of future type events?
• How risky is our tangible and intangible assets for creating value?
• What are the loss drivers affecting those assets?
• Which specific future events could, if they occurred, affect our organization’s ability to achieve its objectives relating to quality, innovation, timeliness, safety, compliance regulation, etc., and to execute its strategies successfully?
• Which events would affect our market share?
• How capable are we of responding to events beyond our control that may happen in the future?
• Do we know what our expected returns are, as adjusted for risk?
• Do risk-adjusted returns vary by business unit? By major product? By geography?
• Is there sufficient capital to absorb significant unforeseen losses should they occur?

“I have noticed that even people, who claim everything is predetermined and that we can do nothing to change it, look before they cross the road.

— Stephen Hawking

Each department has their own perception of risk and severity

Goals and Objectives

Cascade and integrate risk management processes within the framework of the business strategic management process:

1. Business planning processes;
2. Communicate and gain level of understanding of business strategies so that they are actionable and skill supported throughout our organization;
3. Create KPIs (Key Performance Indicators) designed to drive behaviors consistent with the agreed organization strategy.
4. Reward ethically the effective articulation and management of key risks.

·         Ensure process ownership: Roles, responsibilities and authorities need to be properly understood and provided to execute the objectives. – See example supplied below.

·         Design and execute a universal process to monitor and review the top 20% risk profile and identify gaps in the management of those risks, based upon changes in business objectives and in the external and internal operating environment.

·         Define risk management strategies with clear accountability and action steps for building and delivering risk management capabilities, and then improve them through defined periodic planned review.

·         Continuously monitor with time planned reviews the information provided to decision-makers in order to assist them as they manage key risks and protect the interests of shareholders.

“When defeat comes, accept it as a signal that your plans are not sound, rebuild those plans, and set sail once more toward your coveted goal.”
― Napoleon Hill

Action Point:

• Does your organization follow part of the steps mentioned here? Are your risk management and goal objectives active and living parts to your business and employee behavior?
• Make a list of the changes you need to make at a personal, team, departmental, divisional or organizational level to be best placed for future risk scenarios.
• Make a list of the areas within your business you are not aware considering fully these actions.
• Run through your lists with the business leadership and address each point with form dates and people to assure the process is underway for your company.

Conclusion

The task of risk management and its goal management appears daunting to many companies, specifically within the SME (Small medium enterprise) sectors and again at the largest scale companies like (MG Rover, Kodak) however the benefit remains as valid today as it was before the last financial crisis. There is good reason to understand why the task is not conducted, from lack of added value to lack of resources due to operational business demands. Think again however, there can be an ease to gain financial investment from investors to stimulate growth, insurance premium negotiations and strategic confidence the business gains through the process by presenting a robust plan and security with firm process steps and red flag stations to enable your business to perform at its best no matter the adversity it faces.

If you got this far, then I guess this article resonated at some levels with you. Please take a short moment right now to scroll down and leave a comment after you reviewed the points within my Action Point list. Then share this article to which you think will find it relevant and interesting. I look forward to hearing from you. Join over 1600 others on twitter and follow JAMSO on LinkedIn here .

Early Bird Offerings: When you subscribe to JAMSO you get our weekly article straight to your inbox on average 7 days before the rest of the globe! Join that exclusive club FREE NOW and we promise to respect your privacy.

Reference and Resources.

• YouTube video Model Risk Management for Banks and non-Banks by the Global Association Risk management Professionals (GARP)
• The purpose and goals of risk management SlideShare (example provided for the health care market)
• 18 lessons learned by 18 Fintech Start-ups after 18months Slideshare
• Objectives, authorities and responsibility example