Organisations have dealt with the initial impact of COVID-19 and are focused on the recovery phase as Federal and State governments open up the economy. Directors and senior management are now actively looking at how COVID-19 has impacted their forward looking enterprise-wide risk exposures.
Businesses are questioning, firstly whether their existing framework for managing risk was sufficient to allow them to proactively recognise the impacts that COVID-19 could have on their business; and secondly was the required risk information available and in a format that can be used to make critical decisions with regards to organisational strategy. The objective is to be better prepared for future business impacts and to improve business resilience.
A dynamic risk assessment approach
Some organisations are adopting a dynamic risk assessment approach to understand the velocity of risks and their influence on each other, as there is an increasing recognition that the traditional approaches of risk management (looking at individual risks across likelihood and severity) are not sufficient to support risk resilience. In the real world, businesses are in the midst of managing a COVID-19 event, comprising of multiple interconnected risks, with significant speed of impacts and a myriad of consequences across corporate objectives.
Business entities should consider:
- firstly adopting a dynamic risk assessment approach to understand the velocity of risks and their influence on each other and
- secondly challenging processes for the management of risk to ensure they encapsulate the consideration of risk in the four dimensions of impact, likelihood, connectivity, and velocity.
With so much uncertainty, organisations now more than ever should harness the use of technology to assist in the capture and aggregation of information, so that discussions are focused on the major issues or events. Solutions can be developed for those risk events which are most likely to have a significant impact on business objectives.
For a deeper perspective on risk connectivity, technology enablement and other key risk management considerations, please watch the short video below Risk Contagion – Managing and learning from COVID-19 or the webinar recording of Building Business Resilience during COVID-19.
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