The process of identifying, assessing, responding, and monitoring the threats to an organization’s industry position is commonly referred to as risk management. The process is often ultimately the roadway to drawing an estimate of total earning predictions for organizations. The risks to companies can stem from a range of various sources, such as technology, natural disasters, internal systems, legal liabilities, company branding, compliance needs, etc. The insights into these potential threats is crucial in helping businesses make informed decisions about future investment decisions along with the preparation for long-term decision-making. It also allows for the better positioning of a company and for strategic planning that avoids unexpected last-minute costs.
What Are the Biggest Challenges in Risk Management Today?
Currently, the top challenges in risk management are ESG risks that include climate, social, and regulatory issues, ongoing concerns about the global supply chain, and the ever-present fraud, tech, and systems risks. Here are the top challenges to look for:
1. ESG Risks
ESG risks are the environmental, social, and governance-related risks that may influence a company. There are a lot of elements that fall into ESG, including climate change impacts and mitigation, environmental management practices, employee working and safety conditions, a company’s anti-bribery and corruption practices, and an organization’s overall compliance regarding industry-specific laws and regulations. When evaluating risk in this space, it’s useful to recall that every problem may also hold an element of opportunity. For example, the IMF reported last year that sustainability initiatives are a growth area in Asia. In addition, Fast Company shared that in 2021 ESG investments hit an all-time record at an estimated $120 billion — more than double the 2020 $50 billion commitments.
2. Supply Chain Issues
COVID’s disruption to the global supply chain continues to impact a range of industries. Marketplace reported on why industries are still facing snarls. Risk assessors need to factor in what those supply issues mean for them. It’s a good idea to understand if high-priority assets for your business have outside dependencies, and to build back-up plans. Unfortunately, supply chain risks aren’t going away any time soon.
3. Fraud Concerns
Those supply chain gaps have created holes that fraudulent companies are quick to fill. There has been deceit regarding PPE gear since COVID first emerged, and it continues into 2022. The New York Times recently reported on how consumers can find quality KN95 masks due to the prevalence of counterfeits. Due to an early outpouring of government assistance during the COVID outbreak in the United States, there was an increase in loans and loan forgiveness. Some scams pose as government agencies offering aid, and the FTC has a list of warning signs to look out for if your business has been approached with unsolicited outreach. It’s recommended that companies conduct fraud risk assessments, and review for both external and internal fraud.
4. Cyber Risk
Cyber risk is always top of mind when prioritizing issues amongst the many challenges facing risk management. The pandemic has exacerbated issues, with a mostly-remote workforce for many companies. This has elevated risk due to less device control and increased points of potential exploitation resulting from at-home assets being used by employees. As Forbes reports, work-from-home employees are at a greater risk of hacking than those in offices. Home connections are less secure, and the increase of online tools for team collaboration and productivity often have minimal login security settings. The prominence of remote teams has also slowed the roll-out of new technologies, which could expose companies to more security gaps.
5. Inadequate Processes
Risk assessments need to go beyond a standard checklist. It’s important to review the basics, but risk management must also suss out gaps and uncover information that teams are missing — working to determine what they don’t yet know. Make sure that your risk assessment process takes into account steps to investigate and probe for the potential concerns you aren’t even aware of yet, enabling you to uncover every issue.
*Information Source: AUDITBOARD
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