Risk management in a ‘VUCA’ world
Risk management is crucial for companies, especially during these times when the environment continues to be volatile, uncertain, complex and ambiguous (VUCA). Every company needs to be ready for any factor that will hold back the organization from achieving its set goals either in the implementation of its strategies, execution of its process or in meeting the expectations of customers and stakeholders. Risk management provides the avenue to adapt to the VUCA environment, and to protect assets and reputation, ensure regulatory compliance, improve decision-making, safeguard financial stability, strengthen resilience and enhance stakeholder confidence.
We asked Michael Sibayan, our subject matter expert on risk management and process management, the questions that many organizations ask.
Question: What are the risk factors that an organization faces now that it did not consider years ago?
Answer: First, the possibility and impact of a pandemic on businesses were given a low priority pre-2020 due to the low probability of it happening. Resignations of staff in the previous decade were not a common risk for organizations since loyalty was a core corporate value that each employee embodied. However, with the new workforce (Gen Z), job hopping is common and such cases need to be anticipated now by organizations to minimize the impact on the business. Reputation risk is another factor that is enhanced by the prevalence of social media—negative feedback can go viral quickly causing significant reputational damage to the company.
Q: How is risk management integrated into strategic planning and decision-making?
A: The output of strategic planning is to define the goals and the action plans to achieve them. Risk management serves as a supplemental strategy to identify, assess and mitigate roadblocks that will stop or slow down the company’s progress towards success. Risk management also serves as an extra step to identify the feasibility of a defined strategy as it validates if implementation would be difficult or costly given the risk factors. As such, risk management should be embedded in decision-making processes, leading to stakeholder confidence.
Q: Who is responsible for risk management in the organization?
A: Like any other program, risk management should be seen as a discipline and part of the corporate culture. As such, all are responsible for ensuring risks are defined, assessed and mitigated at every level in the organization. Strong executive sponsorship should be present to ensure the success of the program.
Q: How can artificial intelligence (AI) help in risk management?
A: AI technology can enhance the risk management process by making the identification, assessment and mitigation of risks more efficient and accurate. For example, in risk identification, AI can analyze internal and external data to define pattern recognition. In mitigating risks, AI can automate control measures to block any suspicious transactions especially potential breaches of its financial systems.
Sibayan will facilitate a “Risk Management: Protecting People, Assets, and Reputation” workshop on March 20 in Makati organized by Inquirer Academy.
This workshop can also be customized specifically to the needs of your organization. For more information, write to ask@ inquireracademy.com, or send SMS to 09193428667 and 09989641731.
For your other learning needs, Inquirer Academy could assist you in designing and facilitating a workshop, a webinar or a self-paced online course for your organization.
The author is the executive director of the Inquirer Academy.
