Magazine article Risk Management
Methods & Elements of a Solid Risk Management Strategy
Establishing a risk management strategy is not easy. The process demands companywide collaboration, goal alignment, evaluation of identified exposures, development of a plan to deal with those exposures and a commitment to continual improvement. Before developing a new risk management strategy, or re-evaluating an existing one, consider the following advice from several risk experts willing to share their philosophies.
Intimacy of operations, goals and missions. Developing an effective risk management strategy first requires intimate company knowledge, according to Lucille Gallagher, a Denver-based risk management consultant with more than 30 years in the field. "When you first become a risk manager," she says, "you need to learn everything you can about the organization, including its operations, goals and objectives." In doing so, you are better able to evaluate exposures relating to every area of the company.
Align risk management vision with that of the company. The key to an effective, integrated strategy is the alignment of risk management goals and values with those of the company. At one firm, for example, the primary goal of the risk management department is to improve cash flow to the business. For every dollar the sales team generates, risk management tries to retain an extra three or four cents through loss prevention.
Identify and analyze your company's areas of risk. Once goals are aligned, developing any risk management strategy involves identifying and analyzing exposures, according to Gallagher. "Evaluation and analysis of current exposures, processes and strategies is essential in development of an effective strategic risk management plan," she says. The most proactive strategies analyze and plan for potential losses vertically and horizontally across an organization. "You have to pick apart the organization and ask the question, 'what if?' and then develop the appropriate risk management solution to address it," warns Gallagher.
Balance financials and objectives. From this analysis, risk managers are part of a management team, then establish measurable objectives, including how and when those objectives will be met. …