In Tough Times, Risk Management Means Looking Beyond Current Problems

Leadership In Tough Times, Risk Management Means Looking Beyond Current Problems Steve Culp Contributor Opinions expressed by Forbes Contributors are their own. Following New! Follow this author to stay notified about their latest stories. Got it! Oct 24, 2022, 09:27am EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin Increasing volatility puts the risk function on the spot.

getty Even by the standards of an already volatile environment, volatility only appears to be increasing. We may have weathered pandemic-related supply chain disruptions and rapid shifts in consumer demands, but now we are faced with geopolitical instability, energy shortages and related price hikes, global inflation, an evolving and complex regulatory environment, and aggressive shifts in central bank monetary policies. The talent shortages and changing worker attitudes that became so evident during the pandemic show no signs of abating.

Adding to the complexity of this environment, are governments shift in focus to protect their own national interests and move away from the prior path of globalization. We are seeing variations on these themes play out in the U. S.

, the U. K. , Western Europe, Asia and elsewhere.

In essence, we are confronting a whole new set of risks and challenges. This puts the risk function on the spot. Risk leaders need to determine – at high speed – what these new risks mean to business strategy and operations.

They need to identify what investments make sense right now. For risk managers, and organizations, the temptation in tough, volatile times is to cut back and slow down, but this cannot be the core of the strategy. Standing still is not an option in business; in fact, standing still means losing ground competitively.

We see three key imperatives for risk management leaders right now. First, protect the critical components of the business. This means investing to strengthen risk and compliance infrastructure in terms of cloud, AI, analytics, automation, and security.

As our 2022 Compliance Risk Study noted, an increasingly complex global regulatory and enforcement agenda makes it essential for corporations to behave properly and take the right actions. Compliance also supports operational and environmental resilience. Second, focus on costs and efficiency.

Now is the time to automate mundane and/or repetitive processes, accelerate transformative initiatives, and explore new ways of doing business. Managed services, for example, offer attractive options for increasing productivity and reducing costs. While enhancing the technology and data capabilities can make the functions from compliance to cybersecurity more focused and effective in their efforts.

MORE FOR YOU They Inherited Billions Upon Billions: Meet America’s Richest Heirs Placed-Based Impact Investing Takes Off In Buffalo, NY How IRS Taxes Employment Settlements Third, recognize the importance of talent. Risk management leaders should explore non-traditional pools of talent such as data scientists and visualization specialists to bring new modeling and analytics skills onboard. They should also strengthen cross-training and internal development initiatives to broaden career paths and continue the process of making risk management a mainstream business discipline.

Communication matters. Increasing the interactions between the business leaders and risk managers and forging deeper connections with other parts of the business– while maintaining independence to challenge business assumptions and practices – is critical in this complex and fast changing environment. The risk function needs to keep pace not only with the technological changes happening in and outside of their own organization but with strategic and financial risk.

Risk leadership can also demonstrate its value to the enterprise by thinking about what is beyond the horizon, in addition to current and emerging risks. The current focus in this challenging environment should be on protecting the business, while investing for the future. Risk functions need to continually improve their ability to capture and harness data to make better decisions, evolve the risk function to be more efficient, and enable informed investments that support business outcomes.

Forward-looking organizations can come out stronger when volatility subsides. Steve Culp Editorial Standards Print Reprints & Permissions.