Introduction to risk management
Risk management is not an exact science. Risks can’t be measured but they can be assessed; that may be one reason why companies drag their feet when it comes to implementing a risk management system. But that’s not a sound long-term strategy. Considering risks in daily business can save money and improve the bottom line…and not taking risks into consideration can lead to disaster. Also, since risk management is now part of the new ISO 9001:2015 revision, more and more companies are realizing that risk management is not optional. In today’s globalized and competitive markets, the way a company manages risks makes a competitive difference.
What does it mean to manage risks? Any risk must be considered, not just financial risks but also security, health or operational risks related to any company service or activity. Risks need to be periodically identified, assessed, treated and monitored. Risk severity is obtained by multiplying the probability of occurrence by the impact if the risk occurs. The impact is sometimes measured as a financial cost. A good risk management system can prevent that impact by giving companies the information they need to avoid the unfortunate events that might lead up to it.
A concrete example: The strong Swiss franc
Recently, and unexpectedly, the Swiss National Bank stopped supporting the Swiss Franc against the Euro. The Swiss Franc immediately appreciated by 15-20% against all major currencies. For exporting companies such as BPA, profit margins have been cut by 20% almost immediately. With no risk system in place, this could have serious consequences. And in fact many exporting companies will close their business in the coming months due to the stronger Swiss franc.
The currency exchange rate has been identified as a major risk at BPA for years. We took several mitigation strategies to reduce the risk impact. We decided to concentrate more on the local business; we outsourced some of our developments rather than hiring new developers locally; and we reinforced relationships with banks to obtain the best time frames and exchange rates when converting cash. These mitigation strategies help us to keep a strong position in the market with no need to lay off resources or increase our prices. This becomes a competitive advantage against other players that might need to take those steps.
We have the risk management solution to fit your needs
How can you do it with your company? BPA proposes a simple and intuitive collaborative solution for risk management. BPA and its partners can guide you in implementing a tailored ERM solution and share best practices with you.
In better tracking risks, you will reduce costs, generate additional revenues and develop new competitive advantages. This will consolidate your position in the market for the long term.