A Common Risk: Not Assessing Risk

Managing the day-to-day operations of any organization can be extremely time-consuming, often leaving the organization unprotected from risks – both anticipated and unsuspected.

While leaders acknowledge they have worries and/or concerns about such risks, many will also admit they do not have a plan to address them. Without having a firm grasp on the potential risks affecting your business, you can be left vulnerable and unprepared for when unfortunate events strike. A business risk assessment can help. Understanding risk and taking a holistic view of entity-wide risk enables us to help identify, truly evaluate and then appropriately prepare (or not) for potential disasters – both physical and figurative – that may interfere with your business’s operations and objectives.

A Focused Process

The first step towards managing risk is to identify threats, no matter the size or severity. Many organizations are stuck in the weeds of their day-to-day operations and can properly identify a number of short term / minor concerns. In order to properly assess your organization’s risk, you must take a step back and build a picture of your organization from 30,000 feet in order to help develop an accurate representation of your risk landscape.

• In what direction is my business’s industry trending?
• What can we control and what can we not?
• How sustainable is our product? Is it a complimentary or supplementary good/service?
• Are we generating multiple lines of revenue, or is it just from our flagship product/service?
• Have we adequately evolved to keep pace with the market and our competition?

Next, you must assess which of your previously identified risks are critical risks. It is up to your organization’s management to correctly analyze and determine the critical risks for your business. Each risk identified could affect the organization in some way, shape, or form. It is important to determine the likelihood and impact of each risk in order to assess how to appropriately address it.

• Can this risk affect our organization in the short-term or is it a long-term risk?
• How likely is the event and related risk to occur?
• Should the event or related risk occur, what would the impact be to the organization?

Only once your critical risks are identified can your organization start to develop a tailored action plan. By first understanding your organization’s current controls in place, these action plans will bridge the gap, and help prepare your business to combat the risks. This proactive approach can truly provide significant benefits.

Multiple Risk Types

Professionals typically think about risk in relation to finances. And while financial risk is very real and must be considered, there are several types of risks that could impact your organization and require different preventive steps to safeguard your business.

• Financial Risk: Risk of not safeguarding an organization’s assets. Assets can consist of cash, investments, property and equipment as well as customer lists, intellectual property, and other proprietary materials.
• Operational Risk: Risks resulting from inadequate or failed internal processes, people, and systems or from external events. This risk can never be completely eliminated due to human error (the effect of people’s actions) and external factors outside your control.
• Regulatory Risk: Affected by your organizations compliance with applicable laws and regulations. This can be increasingly more important for not-for-profits, government and/or higher education institutions as well as those organizations that are otherwise highly regulated.
• Reputational Risk: Your company’s public image and reputation. This can work for or against your business. The way the public views your industry is often out of your control and can be difficult to manage.
• Cybersecurity Risk: Now more than ever, businesses ranging in size from mom-and-pop shops to fortune five hundred companies to local governments are being targeted by cybercriminals. With the proper cybersecurity measures in place, this will greatly reduce your susceptibility to attack.

An Independent Perspective

Withum professionals are ready to share their experience and assist management and stakeholders with identifying, evaluating and developing action plans to address risks/hazards specific to your organization. The value of this collaborative effort is enhanced by the independent perspective of our team. We come to the conversation without bias and are able to question and probe specific areas to truly uncover potential areas of concern. While we certainly leverage existing documentation and background information, one-on-one interviews with key personnel and stakeholders are conducted to drill down into one or all of the risk categories. Once our team provides a summary of key business risks, we often are engaged to conduct a workshop to facilitate an evaluation or ranking of the risks to help ensure strategic priorities and appropriate level of activity are considered when tackling a risk response.

Then through the utilization of internal risk champions responsible for the implementation and monitoring of your risks mitigation plans, your organization will not only become fully aware of the risks at hand, but have appropriate tools to combat even the most unlikely of situations. Furthermore, our approach to entity-wide risk assessment also helps your organization align strategic planning with your daily business operations.

Next Steps

At Withum, we value our client relationships and take pride in being a trusted advisor. Withum can assist your organization whether you’re looking for assistance identifying risks, developing action plans, or linking your business objectives, risks, and strategies. If you have questions about whether a Risk Assessment can benefit your organization contact us today.

Author: Meg Watson | [email protected] and Christian DiRusso | [email protected]