Meeting the Future: Dynamic Risk Management for Uncertain Times — Lloyd Emerson Johnson
Over the last two years the world has undergone significant changes. This includes dramatic shifts in the nature and landscapes of risks faced by businesses. During these unpredictable times, companies need “dynamic and flexible risk-management” to deal with the heightened uncertainties.
Recently, I read an article titled “Meeting the Future: Dynamic Risk Management For Uncertain Times” published by McKinsey & Company. With my expertise and experience in risk-management, this article greatly resonated with me. The article describes the core of dynamic risk management and recommends companies establish agile risk management practices to strengthen their approach to risk and resiliency in preparation for the future.
The three core components of dynamic risk management are –
1. Detecting potential new risks and weaknesses in controls
It is important for institutions to identify and predict new threats as well as the changes in the existing system. Companies will require “hyperdynamic identification and prioritization of risks” to keep up with the changing environment and to avoid them from being caught flat footed during an unforeseen circumstance.
2. Determining risk appetite
Companies need to examine and decide what risks they can afford to take and which they should avoid. Not only does this refer to financial risks but also other risks as well. “Companies will need to set appetites for risk that align with values, strategies, capabilities, and the competitive environment at any given time.”
3. Deciding on a risk-management approach
While deciding on a risk-management approach, institutions must “make risk decisions rapidly and flexibly, laying out and executing responses, whether immediate or prolonged, about how to avoid, control, or accept each risk”. Furthermore, leaders from an organization should be engaged with the proper advice and expertise to reach an effective solution and decision.
“The world is facing both uncertainty and rapid change. For companies, risk levels are rising — as are the expectations of employees, customers, shareholders, governments, and society at large. Against this backdrop, we believe companies need to rethink their approach to risk management, to make it a dynamic source of competitive advantage.”
Read the original article here.
About Lloyd: Lloyd Emerson Johnson is a results-oriented strategic advisor. With over 35 years of international, broad-based experience, Lloyd considers various disciplines in his approach to management and board governance. Through effectively evaluating all corners of a business, Lloyd Johnson has reinvented the roles of a strategic partner and stakeholder champion. He is a creative visionary who transforms businesses to be effective throughout all of their operations and finances. The pragmatic leader specializes in risk management and ensuring that businesses are prepared for uncertain circumstances.
