Back when BP suffered the catastrophic loss of the Deepwater Horizon oil platform, there were corporate injunctions against risks like carrying coffee without a lid or texting while driving. Given this it seems surreal to think that with such careful rules around personal activity, there could still be an incident of that magnitude.
While making rules about what can and can’t be done has merit in some circumstances, creating processes that provide comprehensive guidance for business practices is a much more effective approach to risk management.
Predicting the future is a risky business
A business risk includes anything that could go wrong in the day-to-day business operations, and range from PR storms to product failures, litigation, financial misfortune, or natural disasters. The consequences of such events can be major or minor, but all of them will have an effect on how the company can reach its goals.
These dangers become even more prevalent during periods of change. The introduction of new product lines or a merger or acquisition can increase possible breakdowns in manufacturing or expose an organization to potential litigation or bad press. Changes to the business environment, legislation, regulation or even cultural and environmental events can impact and influence company operations in ways that could potentially cost hundreds of thousands of dollars.
Rather than put the company on the line, each leader is required to mitigate these hazards by identifying and managing any risks to the best of their ability, reducing the potential danger to staff, resources and profits.
Ultimately, risk management is a process problem. While people, systems and external forces create the conditions that constitute risks, it’s accurate processes that will manage them, and bear the impact they have on your business.
Mapping processes will mitigate risks
Process management is where you define what gets done, what should get done, and how it gets done, in each area of your organization. Through good process management, a business can discover the procedures and practices that shape ongoing operations, and by understanding them, you can then improve them. By capturing that process information, teams can also share best practices, ensuring standardization and compliance with effective processes.
Providing employees with process documentation that is easy to access and understand, organizations can reduce the likelihood of them inventing their own practices. Integrating supporting documentation makes it even easier to follow good processes, clarifying steps, providing forms and guides, and explaining procedures further where technical details are required. With clear processes to follow, the risks of ad-hoc non-compliance and process breakdowns through unclear instructions, inadequate checks, or incomplete execution are dramatically reduced.
It’s not just everyday processes that can help with risk management. While it’s important to clarify typical business practices, having disaster procedures documented and available can be crucial in the event of an emergency. By considering the requirements of extreme circumstances and preparing for them, the organization can both respond more efficiently and recover more effectively.
Clear governance for effective controls
Mitigating risks is a matter of managing the possibilities and establishing controls to eliminate, isolate, or minimize the potential harmful effects. As operational leaders can attest, ensuring those controls are in place and effective requires accountability and a structure of oversight that includes those who know the processes best, and those responsible for their ultimate execution.
A clear governance structure provides transparency around process management in this way.
Ideally, processes are the responsibility of specific individuals, not faceless job titles. Understanding who is responsible for both the execution and upkeep of key processes ensures that there’s a specific focal point for process updates, and changes and reviews won’t slip through the cracks.
When those reviews are carried out, tracking the recommendations and possible changes is important for risk management. Evolving processes can easily introduce new risks or allow for possibilities earlier practices wouldn’t have had to consider.
Knowing who made changes, when, and why is a valuable tool for controlling potential risks. Audit histories and approval systems ensure clear paper trails and appropriate checks and balances and provide evidence of good practice in managing the potential risks. By having invested experts to monitor process evolution, your business can have confidence that the processes are protecting you from risks, not introducing them.
Continuous improvement for ongoing risk management
Change brings risk, and if your processes can’t shift and grow with those changes, then the risks will multiply quickly. Developing a culture of continuous improvement provides the agility necessary to keep pace with changing contexts and conditions, maintaining effective controls as risks shift and develop.
That’s not to say that processes should stifle change. Innovation and growth are essential for business health and continued success.
Good risk management doesn’t hinder that but allows for and encompasses it, providing safe structures for rapid development and recognizing the inherent dangers while eliminating hazards wherever possible.
Continuous improvement also entails automating managed processes. Managing processes is just the first step. Process automation software helps eliminate human error, while accelerating execution speed and streamlining process handovers. Automation also ensures processes are always executed in a standardized way, while still allowing for predictable exceptions. A well-managed and automated process, adjusting over time as business needs change, is a recipe for effective risk minimization across the business.
It is impossible to do business completely without risk, but it isn’t difficult to recognize and control those risks effectively. It all starts with Nintex Process Manager, which provides a framework for recognizing where risks could most affect your organization and establishing meaningful controls. With clear governance, teams can be accountable for the management of the risks they engage with and – through a culture of continuous improvement – provide ongoing structures for mitigating them.
Learn more about taking a holistic approach to risk management. Download the eBook, Business risk is a process problem.