Risk Assessment – Are You Doing It?
There are many forms of risk facing every facet of your business today. Most people consider the risks that are presented through manufacturing or construction, and those clearly present the most physical forms of risk. One might also consider financial risk, which is also an important risk to assess when companies think of investing in a new venture, plant, equipment, etc.
According to this week’s Industry Week newsletter titled “Report shows manufacturers behind on risk assessment practices” dated 3-31-2015., they refer to a joint study conducted by Deloitte & Touche and Mapi that shows manufacturers need to find more ways to continually evolve risk assessment capabilities. In their study they found that “companies need to up their game and have a more analytical, agile and clinical view of risk to effectively address the complexity and velocity of critical risks and disruptions to their businesses.”
I believe that their findings are not limited to just manufacturing organizations, but affect all types of businesses. For example, they go on to say that “Product innovation can rapidly make existing products obsolete, potentially delivering considerable value to the innovator while leaving the unprepared facing competitive disadvantages.” As you can see, this isn’t just limited to manufacturing organizations but to any company that develops products or solutions. “Defining what characteristics can set a company apart competitively – today and in the future – is critically important for risk management. Survey respondents ranked competitiveness drivers such as innovation and talent management as priority business risks, indicating leading practices in these areas may set a company apart.”
Talent management is an area that many organizations have failed to recognize as a risk that can have a major impact on their operations. Think about those employees who have mission-critical knowledge of a job or process. That insight, if lost due to whatever circumstance, can bring their job, department or even the whole organization to its knees if they don’t have a contingency backup plan in place to capture and access that knowledge or expertise when it is needed. According to Professor Baruch Lev of New York University, a paper he released in 2000 suggests that in the U.S., “knowledge assets account for 6 out of every 7 dollars of corporate market value”! Your corporate knowledge is a precious commodity and should be treated as such. Its supply is abundant, but the ability to capture and use it is scarce. Therefore, the inability to capture and leverage that knowledge poses a financial risk to every organization.
Your Sales and Marketing departments are majorly affected by this when they don’t capture and capitalize on the tribal knowledge they have around their prospects, industry and competitors. Buyers today have the ability to gather most of the information they need around a problem and solution before they ever engage a sales person. The risk of not preparing your sales people to be as effective as they need to be poses a financial risk to the organization. Organizations need to take this into consideration and assess how much of a risk they are exposed to by not developing a knowledge capture and retention solution, where their sales people can go to prepare more effectively for their sales calls and reduce the risk of losing the opportunity.
Manufacturing, engineering or product development departments also need to create and provide the same type of knowledge capture solution so they can mitigate the amount of risk they are exposed to by not doing so. If you aren’t assessing the risks outlined above and in other areas of your operation, then the severity of the outcome by not doing so can have far-reaching effects on your growth and financial stability as an organization. At least that’s the way I see it, what say you?