Technology has transformed the way we work and communicate, making it faster, easier, and more efficient. It also brings new opportunities and challenges for businesses, especially in managing risks.
Risks are anything that can harm your organization, such as cyberattacks, natural disasters, or market changes. Risk management, in the world of business, is the practice of identifying, analyzing, and controlling these risks before they become problems. It's not enough to react to risks after they happen, you need to anticipate and prepare for them. That's why you need a future-forward approach to risk management, one that leverages technology to help you stay ahead of the curve.
The main goal of risk management is to protect your organization from potential threats and ensure its smooth and successful operation. Here are some of the benefits and impacts of risk management for your business.
Identifying risk priorities
To manage risks effectively, you need to know your business well, including its processes, people, and policies. This will help you spot the areas where risks are most likely to occur and take action to prevent or mitigate them.
According to a 2023 risk management article by Grant Thornton, the most common types of risks that businesses face are supply chain, third-party, and compliance risks, followed by fraud and environmental, social, and governance (ESG) risks. These risks can vary depending on the industry, location, and size of your business.
For example, GT's Risk Advisory Services Managing Director Sven Stumbauer said that manufacturing companies must deal with the challenge of avoiding sanctions risk, which can arise from working with suppliers, customers, or other parties that are subject to government restrictions. He also said that sanctions lists can change frequently and unpredictably, so businesses need to keep their data updated and accurate.
Government sanctions and regulations can affect any business, especially those that operate across borders or in sensitive sectors. Therefore, businesses need to have a contingency plan in case of disruptions or changes in the rules. A flexible and robust risk management system can help businesses cope with unexpected situations and gain a competitive edge.
Risk management: Technological application
Technology is a key factor in risk management, as it can help businesses monitor, measure, and mitigate risks more effectively. Businesses should evaluate their current level of technology use and align it with their strategic goals. They should also have a system for regular reporting and feedback to track their progress and performance.
One way to use technology for risk management is to store all the business data and files in a cloud database, which can be accessed by anyone anytime and anywhere. This can make work more efficient and convenient, as well as more secure. According to a recent article by McKinsey Digital, businesses should adopt a cloud-native strategy, which means designing and developing applications specifically for the cloud environment. This can help businesses leverage the full potential of digital transformation and improve their risk management capabilities. However, this also requires integrating different networking technologies to ensure smooth and reliable communication.
ESG Goals and Fraud
Another factor that can affect businesses is government regulations, especially those related to environmental, social, and corporate governance (ESG) issues. Some businesses may ignore or neglect these issues, but others have to comply with the increasing ESG standards.
According to GT Risk Advisory Services Managing Director Tony Yang, the US SEC has proposed rules that urge businesses to comply with environmental policies and actions. He said that compliance risk management should be part of the overall business planning and strategy, and that it requires a proactive and reactive risk management program.
The program should align risk management with the organization's goals, mission, and vision. He also said that more people are aware that ESG and climate risks are serious threats to businesses, their operations, and their strategies.
Technology can also play a role in risk management, as a recent article by Grant Thornton showed. The article highlighted the importance of using technology to access and use information. It said that the data should be relevant, accurate, secure, and available to decision-makers. Businesses that can capture and act on risk information have an edge over their competitors.
However, technology also brings new risks, such as fraud. The rise of technological fraud has been alarming for businesses. This shows the need for risk assessments that can help businesses improve their policies, procedures, and internal controls to prevent and detect fraud, while staying compliant with the regulations.
Technology can be a double-edged sword. Most people use it for good purposes, but some use it for illegal activities. Businesses need to have a reliable and effective approach to avoid being victims of fraud. One way to do this is to use a database of fraud schemes and anti-fraud software or technology. This can help them assess the fraud risk, find the control gaps, and identify the people, processes, and tools needed to protect the business from fraud.
To sum up, technology has brought new risks and opportunities for businesses. The technological landscape is constantly changing and becoming more complex and uncertain, as businesses also change and adapt through workforce and digital transformation.
Risk management is not only about protecting the business from threats, but also about making informed decisions, encouraging innovation, and achieving business success. Developing a future-forward approach to risk management in relation to technology is a continuous process that needs regular monitoring and adjustment. By doing this, businesses can navigate the changing landscape with more confidence and reach their long-term goals.
As published in The Manila Times, dated 06 March 2024
