Challenges in Implementing Effective Risk Management

Effective risk management can be very difficult to implement, but the knowledge of these common issues can assist organizations in dealing with these issues:

Resistance to Change: Employees and stakeholders may feel reluctant to implement new risk management practices. Thus, one must overcome this hurdle by giving clear and concise information, educating the people involved and, of course, being the perfect example as a leader.

Lack of Data: Insufficient data is able to retard the process of risk assessments. Organizations are encouraged to use data collection, data analysis, and historical records to facilitate better decision making.

Silos: Departments working in isolation can be a very risky operation that leads to fragmented risk management. The solution is, of course, to get managers to encourage cross-functional collaboration and information sharing.“

Overlooking Emerging Risks: Being only concerned with what is already known can risk organizations to threats that are increasingly growing. Therefore, the first step is to conduct a regular reassessment of the risk landscape.

Inadequate Risk Appetite Definition: Without a clear risk appetite, companies face the problem of dealing with risk-taking and strategic objectives. It is more like a game where one can either remain or move. Those individuals should explicitly define their tolerance levels at certain risk levels.

Complexity: Risk management operations may end up being too complicated. The first action to take is to simplify wherever it is possible, so that practical implementation becomes sure.

Lack of Ownership: Specify that individuals or teams will be responsible for risk management. Responsible people should be able to face policy change and contribute to risk management and the like.

Short-Term Focus: Deciding to concentrate on short term benefits at the expense of future risks, in fact, can bring the company to exposure. The requirement of urgent and long-term profitability should be based upon company’s resilience, which is dependent on the balance between them.

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