Good risk management is not about having a detailed plan for every possible scenario and then allowing that beautifully crafted and no doubt expertly bound binder, to collect dust in the bottom drawer.
Instead, good risk management is about keeping your eyes open and creating a strong risk culture and understanding within your organisation.
This article’s aim is to provide a straightforward approach for Cayman businesses to adopt in order to achieve better risk management and help drive a better risk management culture.
At the most basic level, better risk management starts with two words, What if? By commencing a discussion with your management team with those two words, you will already be ahead of the pack and better prepared for the future.
The point of risk management is to ensure you don’t find yourself asking What now? or, How did we not see this coming? but instead, have an approach and some fundamental principles in place for you to deal with risks ahead of time.
One approach to adopt is as follows:
- Identify the key areas to your business. By identifying the most valuable and essential components to your business, you will be better able to protect what is most important and help prioritise your risk management. Do this by making a list from most important to least important, ensuring that you question and validate why one aspect or process may or may not be as important to your success as another.
- Identify the likely threats to your key business areas. For your key business areas/processes, identify what actions/events would threaten the continuance or efficiency of each key area. Such threats can come from many sources and it is important you work through the full range of likely possibilities.
- What if? Go through each threat and discuss what your response would be in the event that threat eventuated. It is important at this stage to be very realistic about your likely response and what could be achieved in the face of that threat, given the likely impact on your business.
By simply going through this process you and your management team are developing appropriate risk responses ahead of time and building a better risk management culture.
Accept, mitigate, lessen or transfer the risk. Having completed the What if? stage, you are now in a stronger position to determine what risks you need to transfer/remove from your business, through insurance for example, or given the potentially low impact to your organisation, what risks you should simply mitigate or accept. The below matrix is a good tool to aid you in this process.
When deciding to spend your time or money on transferring or removing a risk, you will be better protecting your business and making the most from your investment if you first focus on the essential or highly probable threats that are likely to have a highly negative impact.
Remember, no business can afford to remove all risks. The business that is constantly assessing the threats to its operations and ensuring that the major risks are understood and appropriately managed, will be better positioned to succeed in turbulent times and make the most of opportunities as they present themselves in the future.
For further information on how KPMG can help you succeed during these turbulent times please contact Kris Beighton on +1 345 949 4800.
The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG. All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity.