At this time of the year, most business owners and managers are
updating plans for 2014. These plans might include budgeting for
financial and employee growth, plans for launching a new product,
or opening a new office to serve customers. All of these business
initiatives contain an aspect of risk in order to reach the desired
outcome. In the business world, risk is most simply defined as the
possible deviation from your planned business achievement and
objectives or as I like to say: 'What could go wrong?"
Taking a proactive stance on identifying and assessing your
strategic risks, leads to tactics that are more effective to
minimize the risk of failure, while maximizing the potential for
success. Through our Crowe Horwath Global Risk Consulting practice,
we can help you look at how risk is managed throughout your
organization so you can be empowered to react timely, decisively,
and profitably within today's complex global marketplace.
Specifically, any company can adopt a practical, five-step approach
to enterprise risk management (ERM):
Organize the effort – involve your team
and appoint an ERM lead. ERM is more than just insuring against
loss and perils;
Establish a framework – establish a
common risk language across your business – strategic,
operational, financial, information technology, governance; and
Conduct risk assessments and risk analyses
– identify, assess, and understand your "What could go
Inventory risk responses – document your
plans of action (accept the risk, transfer the risk, avoid the
Implement risk-response monitoring –
assign each major risk an owner and key metrics to report on
whether the risk is stable, increasing or decreasing.
A strong commitment to a risk management program enables the
board and management to evaluate their strategy to determine if
it's realistic, and then determine whether the strategy needs
revisions or modifications. So, where can you begin in your own
business? Let us start with your strategic risk. Strategic risks
are the "What could go wrong?" events such as:
New product developments – are there
competitive new innovations, R&D investments to make, new
product lines to explore?
New sources of finance – are there ways
to manage to the optimal debt to equity ratio or a lower cost of
Acquisitions or dispositions – organic
growth or acquire? Divest low growth business?
Outsourcing or maintaining processes and competencies
in-house – opportunity costs?
Corporate governance – is our business
organized and governed effectively and according to best
Leadership – do we have the talent
development and succession planning processes that we need?
Alignment to the company's objectives
– is each division, office, or plant on the same page?
Planning processes – do our business
leaders get the information they need to make good decisions?
Do some of these apply to you? What do you do next? Identify and
assess your risk. Risk identification requires knowledge of the
organization, the market in which it operates, the legal, social,
political and cultural environment in which it exists, as well as
an understanding of strategic and operation objectives. Which risks
or events can impact the achievement of your organizational
objectives? What is the potential impact of the risk and how likely
is it to occur? Approaches to identifying and assessing your risks
Surveys of management and employees
Risk identification and assessment workshops
Interviews with key management and board members
Judgements based on experience
Factors to consider when selecting an approach include:
Complexity of issues
Company size and number of participants
By identifying, assessing and monitoring your specific strategic
risks, you can approach 2014 not only with a clear strategy, but
with an understanding of how to adjust your business plans if
outcomes develop differently than originally envisioned.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Law Society of British Columbia’s Cloud Computing Working Group issued its Final Report on Cloud Computing on January 27, 2012, amending an earlier consultation report approved by the "Benchers" on July 15, 2011.
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