Risk management is an area that you cannot overlook in the present scenario. Organizations now and then face risk management challenges and know how crucial it is for their smooth working. Hence the demand for professionals with risk management certification has increased manifolds. There are several challenges that the employees and senior management face while implementing risk control systems. If these problems are not addressed quickly, it can make your organization vulnerable to cyber threats and data breaches. Firms, whether financial or non-financial, worldwide face risk implementation and handling issues. Here we will discuss the top five risk management challenges firms face and possible solutions that can be considered for better risk controls implementation.
1. Absence of Proper Decision-Making Structure
In most cases, business executives responsible for risk decision-making take into consideration risks involved in any project before its launch. However, sometimes it might happen that they overlook the dangers involved. Because they get perks only when a new product or service is launched that benefits the company. Taking into consideration risk factors might delay or stop the release of the product or service. In that case, they won’t get any incentives. So, here right people are not appointed for risk management tasks. It can make an organization vulnerable to several threats and degrade its market reputation also.
Organizations need to develop a separate risk governance structure and allot such essential tasks to the right people. Now, who are these right people? These are the people who take the responsibility to identify risks and suggest appropriate methods to mitigate their effects. They can be held accountable for both good and bad impacts. A risk management structure should be implemented at each level in the organization, and proper measures should be taken for its monitoring at each stage. Also, companies must define the decision-making powers of project managers to lower the occurrence of risks.
2. Lack of Genuine Risk Assessment Process
Organizations several times face superficial risk assessment issues. Risk managers sometimes cannot conduct a proper risk assessment or do not possess the right skills to develop an effective risk assessment plan. A meaningful plan enables risk identification at every level as per the company’s business goals. It is explained in business terms both qualitatively and quantitatively.
Also, sometimes risk managers cannot assess the size of the losses their organization has to bear. They might determine the risks at different levels but forget to correlate the effect of risk among various levels. It is known as mismeasurement of the identified risk and is a common problem faced by organizations worldwide.
Risk managers have to change the way they think. Implementing practices based on a predefined list and not considering points not present on the list can lead to an ineffective risk assessment process. The practices you adopt should only be considered as controls to monitor identified risks. Sticking to a list will mean overlooking high enterprise risks and spending too much on areas that require less risk mitigation. Business goal-based risk identification, assessment, and management strategy leads to the more appropriate use of risk-lessening resources and saves organizations a massive amount of money. ##3. Lack of Communication between Business Managers and Senior Executives
The success of any organization is based on the working transparency among different departments. Lack of communication among project or business managers and their senior executives can lead to risks being left unidentified. Senior management and board use the details about risks provided by risk managers to finalize a risk control strategy. If a risk manager does not convey this information effectively, senior executives might make bad decisions or become over-optimistic about the project’s success. It can not only harm the project but also pose a threat to the organization's overall functioning.
Organizations should focus on creating a work culture where there is transparency between business managers and their executives. It will stop business managers from analyzing risks independently and avoid the problem of several significant risks getting unnoticed and lower the possibility of their occurrence. Outsourcing tasks to certified risk management professionals can help identify the unknown risks, create a better strategy to mitigate them, and monitor their effectiveness.
4. Difficulty in Taking into Account all Possible Risks
Sometimes it becomes challenging for the risk manager to consider all the known or possible risks involved. It happens as it is impossible to detect all potential future threats, and also, the cost involved in doing so is high, and companies might not be ready to invest so much in risk management. Because of this, organizations often develop a viewpoint that there is no requirement to identify and mitigate risk associated with small projects. Their sole focus is on making their big projects secure.
Though, indeed, all risks do not need to be worked upon, you cannot leave a project from being analyzed for risks just because it is small. All projects need risk management as every project delivers benefits to the company in some way.
Also, the cost involved in risk management will prove to be much lower than the loss you have to bear on becoming a victim of a cyber-threat.
5. Inefficient Risk Monitoring and Management
Even if the risk control system has been effectively implemented, sometimes it becomes challenging for the risk managers to monitor the process and risk characteristic changes that might have occurred. Hence, they fail to monitor and adjust risk controls because the changes take place too fast, leaving them with no time to assess and implement changes to secure the system.
Though the risk management system is quite complex, it can reduce risk management challenges to a great extent if done effectively. You can do a more rounded and comprehensive risk assessment at various levels to overcome this challenge. You can also employ or hire IT experts with risk management certification.
You can also train your existing IT team by motivating them to appear for ISACA’s CRISC certification exam and get certified. But still, you need to be aware of the possibility of failure.
To Sum It Up
There! You have it! Risk management challenges organizations face due to the absence of skilled risk managers. It shows how important is risk management certification, such as ISACA’s CRISC for IT professionals. Certified professional or risk team play crucial roles in responding to the challenges and help organizations operate smoothly. They can create an efficient and practical risk management framework that complies with an organization’s business short-term and long-term goals. It includes risk identification and assessment, creating a strategy to lessen the occurrence or impact of risks, and monitoring the strategy’s effectiveness to enable senior executives can know the risks to take care of before commencing any new project. There is no limit to the number of risk challenges that a firm has to face. Here we have discussed some of the major ones. If you have tackled any other challenge, do share your experience in the comments below. It will help others with a similar problem.