Why is risk management important in organizations? What benefits are gained by implementing a risk-management program? Describe challenges you see in obtaining buy-in and support from staff. What are the barriers to implementing a risk-management program? What would you recommend to help overcome these barriers?
The first two questions that you ask here have essentially the same answer. Risk management programs are important because of the benefits that they confer on an organization. All business organizations face various kinds of risks. They can face risks from environmental factors (for example, a construction company could be affected by an early winter). They can face political risks. An example of this would be a “green energy” company that could be affected by changes in government subsidies. They can face risks from lawsuits filed by workers hurt on the job or other people hurt as a result of the company’s actions (like those hurt by the BP oil spill in the Gulf of Mexico. Risk management programs are important to a company because they can help the firm to prepare for these risks. If the company is aware of risks and has contingency plans in place to deal with them, it can minimize the impacts of these risks if and when they occur.
A problem that can arise with implementing risk management programs is that staff may not want to accept the programs. People tend to dislike change. They do not like to see new programs implemented that force them to change the ways in which they work. They may feel that they are being asked to change for what seems to them to be no good reason. They may feel that the plan implies that they were doing things wrong before. This will be particularly true if they were involved in creating the processes that are now being changed. There will also be resistance if employees believe that the new plans might make it harder for the company to earn profits.
Outside of staff resistance, a major barrier to the implementation of such plans is a lack of support from upper management. There may be a feeling that these plans are an unnecessary drag on the firm’s resources. Implementing a risk management program requires money, time, and effort. When these resources are put towards implementing the plan, they cannot be used for other things. This will cause some people to resist the changes.
The only real way to overcome these barriers is to convince as many people as possible of the importance of risk management. Staff will generally be more willing to accept change if they can see how it will help their firm. Upper management will be more willing to allocate resources to creating and implementing risk management programs if they are convinced that those programs will protect the firm’s financial security. What this means is that proponents of these plans need to communicate well. They need to gather evidence that shows that their plans will be beneficial and they need to communicate that evidence to everyone in their firm in a way that will get through to as many as possible.
Risk management is important to business to make sure an organization stays in its place in terms of market factors such as volatility. There are consultants who are specialists in this field. Risk management areas are crucial to the organization especially with economic factors being challenging. There is a need to control such environments.