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Every business is susceptible to vulnerabilities, no matter how positively its product or service is recognized by the market.
Factors may occur, be they internal or external, that generate possible threats to the organization’s welfare. Therefore, being prepared for these adverse situations is the best way to reduce their impacts.
And do you know how to be prepared? With Risk Management!
What is Risk Management?
Risk Management is a set of analyses performed to identify improvement opportunities and reduce losses within organizations. According to ISO 31000, the best reference for Risk Management, this is a strategy that aims to control possible situations, considering the risk and effect of uncertainties, and working preventively to bring positive results for all departments.
And what are the risks?
Risks are events that have a cause and therefore consequences, but rather than covering a negative view, they act as potential improvement opportunities. In other words, risk management is fundamental within the company. It’s very important to identify possible problems in advance to enable a positive bias to the solution of the event.
In this sense, risks are composed of three main elements:
- Event: what happens;
- Consequence: what is generated from the event;
- Cause: the situations that allowed the event to happen.
This context, to break it down a little further, via ISO 31000, exists as a set of analytical statistics to manage risk, which is comprised of:
- Risk identification;
- Analysis of risk;
- Evaluation of risk;
- Treatment of risk;
- Verification of the effectiveness of those actions.
Thus, making the PDCA cycle, which is an essential management method for the promotion of continuous improvement within the organization’s processes.
For you to dig deeper and understand the topic better, we have separated two examples of Risk Management in practice:
Example 1:
A Company in the textile segment is going through an electronic document management process, which will take care of the whole employees’ documents life cycle. Among the stored files, vacation receipts were found without signatures.
- Event: discovery of confidential documents without a signature;
- Consequence (risk): receiving non-compliance in audits and even a lawsuit;
- Cause: digitizing document management.
This risk is related to the opportunity, if the organization had not managed the documents and digitized everything to become electronic, it would not have found the vacation leaves without signature. Although it seems simple, the consequences of this event generate a lack of control in knowing when the employee effectively went on vacation, and even legal problems, such as a lawsuit. In this case, a possible solution to this risk is the adoption of tools such as electronic signature and automating it.
Example 2:
A large supermarket has stored spare products in its stock, and the air conditioner is leaking on top of some of them.
- Event: broken air conditioner;
- Consequence (risk): loss of spare products, generating stock shortage;
- Cause: periodic air conditioning maintenance.
Note that there is also a risk related to an improvement opportunity. As they haven’t done periodic maintenance, it caused damage to the supermarket’s stock, causing breakdowns and financial losses due to the potential lack of products on the shelves.
What is the importance of Risk Management?
As already mentioned, it‘s extremely important to maintain Risk Management. When a company anticipates its possible problems it has numerous gains, after all, this practice both identifies the opportunity and the means to avoid or mitigate losses.
Nowadays, monitoring performance, risks, and compliance is a company’s performance indicator, that is, if for some reason risk management is not done in a certain situation, there will be more rework and losses, often with financial impact. Being able to manage risks and observe, plan, and execute a new improvement opportunity will give the organization a well-defined process, reducing costs and boosting productivity.
Check out some of the benefits gained by applying Risk Management:
Customer satisfaction
Companies with effective risk management have a high-performance team that thinks about the safety and satisfaction of their customers.
Security in Compliance Management
Within the organization, when there is a compliance department, it’s Risk Management’s best ally, because it measures if all the required rules are within expectations. This way, rework in internal processes is avoided and the risk control practices contribute so that the company is not fined or suffers some kind of judicial penalty.
Increase in productivity
When the organization has defined rules, it can anticipate probable issues and can assure its employees more productivity, efficiency, and agility. When processes are defined it’s possible to visualize risks and analyze the related improvement opportunities.
Cost Reduction
We can affirm that the more the organization can reduce costs, anticipating and directing the loss to something positive, it avoids the occurrence of fines and lawsuits. It ensures not only quality in all processes and operations, but also provides a much safer and more productive environment.
ISO 31000, what is its role in Risk Management?
ISO 31000 is the Risk Management reference for organizations. ISO is an organization that certifies the quality of companies’ processes. The norm does not directly say how to do it, but rather how Risk Management has to be done since it varies from company to company. Therefore, having this practice established is something that will ensure that the organization is in accordance with the ISO standards and show the market and customers how much it values the improvement opportunities.
Conclusion
We can understand that every company that uses Risk Management will have a safer, more confident business. We reinforce that it’s necessary to anticipate threats, and identify negative consequences, in order to actually notice the improvement opportunities.
In the midst of the digital transformation era, it’s essential to use tools that can help you improve your processes, have greater efficiency, and be able to enjoy all the benefits that risk management brings, including ensuring the certifications required by ISO.
Fusion Platform provides the management and automation of your company’s processes, contributing to a greater organization of documents, and process effectiveness, assisting in Risk Management with accurate performance indicators, and constantly encouraging continuous improvement.
Undoubtedly, implementing Risk Management brings the possibility to innovate and create several competitive differentials for organizations.
