Overview:  Risk and Competitive advantage

Reality: Risk management can make or break a company's success!

In Florida, we are not strangers to the need for Insurance and the consequences of a cataclysmic event. We understand Risk Management whether it's our home insurance or our business policy. You may cut some premium by sharing risks with the insurance company, but most of us would not skip the insurance completely, yet that's exactly what some companies are doing when they don't perform sound risk management activities.

Strategies for Risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk are part of Risk Management. Traditional risk management focuses on risks stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death, and lawsuits). Technology Risk Management of course focuses on risks that can be managed using technology solutions.

In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled later. In practice the process demands experience, collaboration, and solid processes because balancing between risks with a high probability of occurrence but lower loss vs. a risk with high loss but lower probability of occurrence is often be mishandled.

Intangible risk management identifies a new type of risk - a risk that has a 100% probability of occurring but is ignored by the organization due to a lack of identification ability. For example, knowledge risk occurs when deficient knowledge is applied. Relationship risk occurs when collaboration ineffectiveness occurs. Process-engagement risk occurs when operational ineffectiveness occurs. These risks directly reduce the productivity of knowledge workers, decrease cost effectiveness, profitability, service, quality, reputation, brand value, and earnings quality. Intangible risk management allows risk management to create immediate value from the identification and reduction of risks that reduce productivity.

Due to pressures for short term results, Risk management activities face difficulties attracting resources from time to time. The idea of opportunity cost should be considered: resources spent on risk management could have been spent on more immediately profitable activities. Here is where experience pays off because proper risk management minimizes spending while maximizing the reduction of the negative effects of risks.

When Risk Management became part of the requirements for compliance with GLB, SOX, HIPAA, and other regulations, formalized and standardized processes for examing risks became the norm for Risk Management practices everywhere. Discover for yourself how Norris Long can make your due diligence activities yield tangible improvements in existing operations while working with you to identify and defuse major risk categories.

Call Bill Long for more information.