Company risk management is not difficult. It is important to regularly consider threats to the company and how to prepare for them.
Do you recognise future threats? Successful comprehensive risk management, safety and security management, and preparing for disruptions require new types of expertise from companies. An understanding of the company’s constantly changing external threats and preparation for their materialisation are needed.
Identification of critical suppliers and companies in the value chain
The operating environment, external threats, and requirements of companies are changing at a rapid pace. They also change the risks faced by companies, which are becoming increasingly complex. Risks that threaten business activities are increasingly related to supply and value chains. Suppliers of critical products and services and other partners should therefore be identified, from the raw material suppliers to the end users of the products and services.
It can be said that comprehensive risk management and preparing for serious disruptions and crises are already standard issues on the agendas of management team meetings in many companies, in addition to responsibility requirements. If this is not yet the case, it should be. Companies and other organisations are today facing complex challenges and uncertainties, both external and internal. These make it challenging to ensure trouble-free operation and safety.
Do you know what kinds of significant external risks and serious disruptions and crises the organisation may face, and how to prepare for them in advance?
Also be prepared for “black swans”
In addition to traditional disruptions and crises, companies should be well prepared to face black swan events. These refer to the materialisation of even unexpected situations that have not occurred before.
The name “black swan” comes from the old belief that all swans were white, when suddenly a black swan was found. The black swan theory was developed by Lebanese scientist and author Nassim Taleb, who was able to foresee many unpredictable events that shocked the world. The black swan theory has defined many phenomena that have undoubtedly shocked our personal, psychological, economic and political balance.
Examples of black swan events include the use of passenger aircraft as weapons during the WTC terrorist attack and other terrorist attacks, Brexit, the worsening of the Covid epidemic into an international pandemic, and the impact of unexpectedly fast technological development on business operations and people’s lives. Many experts agree that we are living in a time that this theory largely represents.
It is important to consider dependency risks, which cause chain reactions
It is challenging to anticipate and assess the impact of these events on the company’s value chain in advance. Global crises or supply chain disruptions in particular can be difficult to predict, and they involve the combined effects of different risk factors.
We can also talk about complex risks. These involve complex chain reactions and are reflected in many different areas of operations. Simple risks are often individual and foreseeable threats, whereas complex risks consist of several factors with complex, even wide-ranging effects. It is important to take dependency risks into account in the mapping and analysis of threats and risk management, including the functioning of information technology and communications, and the availability of services and materials in all circumstances.
Examples of significant risks:
All companies face significant and constantly changing information security threats. Any company or organisation may face a sudden denial-of-service attack or data breach.
In the news, we constantly hear about various acts of vandalism, even sabotage. Unfortunately, some of these unpleasant events are such that the perpetrator and the motive of the act can never be found out.
The most worrying events are those affecting critical infrastructure such as energy, telecommunications and communications networks. There are also several examples of these, which have also been discussed in public. Well, of course, not all events end up in the public domain – luckily or unluckily?
As a result of the large maintenance backlog in the water supply network in some areas, regional water crises will increase. The situational management capabilities and crisis management and crisis communication skills of the water utilities and municipal officials are put to the test in these situations.
Climate and weather conditions are inevitably changing, and as a result, extreme weather phenomena have been and will be encountered, such as heavy rain, freezing rain, storms and other severe weather.
Preparing for serious disruptions and maintaining the safety and security level require, among other things, continuous monitoring of threats, anticipation, reacting to even weak signals, and proactive measures.
Author: Kari Helislahti Safety, Risk Management and Quality Expert Patera
