Risk can never be completely avoided, but it can be managed through proper implementation of a well-defined decision-making process.
The following risk matrix can be used to assess the risks of an organization:
Risks that emanate from within the organization
Risks that emanate from outside the organization
Strategic Risks
Loss of key employees; failure to keep up with R&D; unanticipated M&A activity
New competition; changes in customer or industry preferences; new innovation
Hazard Risks
The release of tampered or unsafe products and services; landlord liability (slip and fall)
Breached contracts; natural disasters; terrorist attacks
Operational Risks
A breach of financial controls; a breakdown in the chain-of-command; IT or system support failure; supply chain failure; inability to recruit new hires
A change in regulations; a new Board of Directors; guilt by association (a bad actor within an industry group)
Financial Risks
Lack of liquidity – poor cash flow management; poor investments
A change in interest rates; currency risk when trading overseas; tighter credit
Social, or Entitlement, Risks
Executives acting in their own self-interests; displaying behavior inconsistent with the organization’s ethos
Everyone else is doing it; a change in what is considered culturally or politically acceptable
In assessing sources and levels of assets, the following checklist can be applied to any business or organization:
- Personnel, and their individual talents—regarded by most to be the most important asset;
- Senior leadership and capable people in critical roles;
- Cash reserves and other available funding sources;
- Technology and systems infrastructure;
- Goodwill, integrity, and brand recognition;
- Proprietary knowledge, trademarks, and copyrights;
- Vendor relationships and alliances;
- “Bricks and mortar”
- Cyber presence; and
- A strong organizational ethos!
It’s important for decision-makers to know whether stated long-term goals and objectives (Dimension 1.2) are time bound – that objectives need to be achieved by a specific date. Such information will impact the allocation of time, people, financial resources, and technology.
In addition, decision-makers should identify short-term expected outcomes that need to be accomplished in order to meet long-term goals and objectives. Think of a PERT Chart (Program Evaluation Review Technique) that is commonly used to schedule, organize, and coordinate projects and activities. The chart captures the interim objectives and gates that have to be cleared in order to meet the stated long-term goal.
