Perhaps the most important feature of the risk management context that will determine the success of the enterprise risk management initiative relates to how the initiative is implemented.
There are two other very important factors in an effective risk management program: communication and culture. Communication is particularly important in an organization because it gives employees a chance to discuss and pass messages among themselves. Communication allows senior management to discuss their plans with the employees and set expectations, goals and objectives.
Internal communication is essential, as it improves performance and business processes in an organization, hence mitigating risks. It creates an opportunity to discuss how to boost a firm’s performance by passing information on various risk mitigation strategies. Also, members understand their roles and responsibilities despite changes in the structure of the organization. Therefore, employees can identify, assess and make conclusions on risks in a broad section of the business and mitigate such risks.
Communication is essential in creating collaboration among team members as they understand and support the organization’s goals in risk management. Organizations with a risk-aware culture are characterized by communication founded on mutual trust and a shared perception of the importance of risk management.
Before you can improve or create new communication strategies, you need to first assess what your current communication strategy is. Feedback is an integral part of any communication strategy. It can help you understand your employees’ perceptions and improve your company culture. This includes identifying common terminology and sharing helpful phrases with new employees. By building trust between employees and their employers, it creates transparency that helps employees feel more secure and engaged.
The idea of risk management is less of an implementation of a framework of rules as it is a reworking of the way in which an organization evaluates situations and communicates decisions. I’m currently reading Lights Out: Pride, Delusion, and the Fall of General Electric, which details the history of General Electric from the end of Jack Welch’s run as CEO in 2000 through 2020. There is a story in the book about GE’s decision to buy Alstom — a leading French manufacturing concern — including how the decision was constructed and the outcome.
The interesting part of the story was that GE had a very well-developed risk management operation that had performed an analysis of Alstom a few years previously as a potential takeover target but ruled it out because of red flags highlighted in its risk analysis. However, a few years later, the CEO decided to push ahead with the acquisition without any consideration of the work that the risk management team had performed earlier. The result was the acquisition ended up catastrophically. One could say the risk management culture of GE had eroded over time to the point where the decision by the CEO was not evaluated in terms of potential risks, and a very bad outcome was the result.
Culture is vital to the success of risk management programs, as it is bided by collaboration and management of long-term goals. Organizational culture builds up teamwork, risk-taking and open communication in all risk mitigation strategies. The combination of different cultures in an organization is essential, as it makes a firm cohesive. The values of each member are represented, hence building a culture of reliability.
Engagement of different cultures promotes the behavior of conducting meetings, sharing beliefs with others and seeking consensus for the success of the risk management program. Effective risk management requires culture, as it is a pillar that builds interactions, allows sharing of knowledge and allows individuals to exchange ideas. Therefore, culture is essential in creating individuals who can generate solutions, ideas and knowledge for an organization constantly.
With more employees working from home, technology is becoming an increasingly important communication tool. There are many tools that can help you communicate and collaborate with your teams such as Slack, Google Chat, Asana and Lucidchart. Share your company’s vision and strategy with all of your employees. This strategy and these goals can be communicated regularly during one-on-ones, performance reviews and in-person meetings. As an employer, you can improve the effectiveness of your internal communication by regularly communicating your goals and strategies. This will help your employees connect with you and your organization. Your internal communication plan is your organization’s way of communicating with each other and with the outside world.
Communication among the individuals would also help in transmitting the information from one individual to another. They should also use the resources to transmit the information well without any deviation in the information. Planning would also play a major role in risk management because a well-planned risk management plan would definitely identify the risks well compared to any other resources available in the organization. They should scale the methods used in the communication process and implement them without fail.