Humankind has been performing risk assessments since the first time a caveman peeked out from his dwelling and determined if it was safe to run to the watering hole. Assessing risk is an inherent capability we are all aware of and is the foundation by which we attempt to understand uncertainty. In today’s world, uncertainty is an unwelcome but constant companion and organizations clearly understand the role risk management plays in ensuring success. Thus, the process of systematically assessing risk across the business has become an absolute pillar of the risk management program. However, this practice is not without its own evolution. Gone are the days when an organization can feel comfortable with a simple periodic review of potential issues. Risk assessments have changed significantly in response to changing times.
More time and effort is being spent on risk assessments due to the highly visible nature of risk and the interest level of executive management, audit and risk committees and board of directors. Just like the caveman learned it was insufficient to take a quick peek and head out into the jungle, organizations are taking a more mindful approach and dedicating resources to ensure the most relevant and appropriate data is reviewed to inform risk reporting. This is no longer a ‘check the box’ exercise but a real input into decision making and strategy building at the highest levels of the organization.
The frequency of risk assessments has increased to provide a more continuous view into potential issues within business operations. Along with spending more time and effort to gather information, data is being collected on risks on a much more frequent basis to keep pace with business and operational changes. The volatility of the market, the increased regulatory pressures and the amplified consequences of negative events have pressed risk management functions to quicken pace into an ongoing cycle of assessment.
The need for tangible, defensible outputs from risk assessments has led to an increased focus on quantification of risk to better support decision making. While qualitative assessments can provide general direction and prioritization, the broad categorization of risks using traditional heatmap methods makes it impossible to truly stack rank potential issues and balance investment with return. Translating uncertainty into potential exposures and financial impacts is enabling organizations to evaluate where the biggest bang for the buck comes from when making decisions to implement controls.
The evolution of risk management needs has led to many organizations recalibrating their approach to risk assessment. Download our short white paper “Evolving Your Risk Assessments: Tips for build a future proof strategy’ for recommendations on how to position your risk assessment approach to meet the immediate and future needs of your organization.