During these uncertain times, mitigating risk is a key factor for leaders to consider as they assess the challenges before them. Unfortunately, risks are a part of our lives. This quote from Harold Macmillan, 1st Earl of Stockton says it well: "To be alive at all involves risk."
Risks are an intricate consideration every day for leaders and especially relevant during the present COVID-19 pandemic. As you may know, risk cannot be eliminated. However, the focus of leaders is to understand what risks are relevant to their organizations and set forth plans to mitigate those risks.
Aldridge Kerr recently worked with a client to more clearly define their internal controls and the risks that come without effective mitigation. It was clear that there were many internal controls that were loosely managed. However, the good news was that once those weak controls were identified, they could begin to tighten the controls to mitigate the risks associated with them.
- First, identify the risks they face. These will vary based on industry, staffing needs, government and CDC requirements and/or recommendations, the organization’s objectives, etc. Also, the risks as organizations make tough decisions related to their futures, how – or if – to return to the workplace, managing the safety of their staff and Customers, etc. all need to be considered. Quantifying the risks is an intricate factor as those risks are identified.
We at Aldridge Kerr have been using the word “resilient” What does a Company do to be resilient in this ever-changing business climate? What can a Company do to be position it to move quicker than their competitors to increase their market share?
- Secondly, the identified risks need to be evaluated and prioritized to determine those that have the potentially greatest impact if not effectively addressed. Gaining insights into those risks that could have the biggest impact (whether positive or negative) is necessary before defining next steps.
We recently were asked to participate in a podcast and shared with the listeners that unclearly-defined priorities are some of the biggest obstacles to long-term sustainability. This is especially relevant during these uncertain times. Having clarity on priorities is the foundation in improved efficiencies, creates operational effectiveness, and is a guidance principle to mitigate risks.
- Third, define how to best mitigate those identified, prioritized risks. This often requires gaining further insights into the options available, those requirements outside of the organization’s control (i.e., regulatory requirements), assessing feasibility and cost, considering potential contingencies, and aligning these with all impacted stakeholders.
This is a “roll up your sleeves” task: taking a hard look at the identified risks and taking steps to mitigate them. Remember, risks cannot be eliminated; however, putting effective internal controls around your greatest risks ultimately reduces costs and positions an organization for long term success.
- Lastly, establish and implement a plan to mitigate the risks being faced based on their priorities. This plan must include a Test and Communication Plan to validate its effectiveness.
A common mistake that Companies make is they do not understand the importance of a long-term commitment to manage their risks. This requires an Execution Plan to put internal controls into place, then a Maintenance Plan to routinely (a minimum of every 2 years) validate and test the effectiveness of those internal controls.
Leaders who proactively mitigate risks position their Company for operational effectiveness, financial strength, and sustainability to support their long-term objectives and goals.
Aldridge Kerr can assist your leaders as they evaluate the risks they are facing using a proven, effective facilitation methodology. Contact Charlene Aldridge at www.aldridgekerr.com to discuss how we can assist you.