Monday, June 21, 2010

Just for old times sake.......the Top 10 mistakes in Risk Management - Part 1

On the basis that sound theory stands the test of time - below (Part 1 of 3) was first published in a series of tade journals in 2002, before the world woke up to risk management. As I read this again and again, I cant help thinking that what we aspire to in Risk Management is nothing more than applied common sense, and that the real key to effective processes is understanding how people and risk interact.

More's the pity that so much else in life is so less clear!  

1. Assuming it wont happen to me

Within every business practice there is an element of risk, and ignoring this fact is an invitation for catastrophe. Right now your company is vulnerable in some way. Hoping that the exposure won’t eventually result in dire consequences is a gamble. Wake up and take the first step. Undergo a comprehensive risk assessment by independent experts.

2. Failing to understand the consequences and long term business impact of risk.

50 percent of all businesses that suffer a catastrophe of any kind close within a year. If this were more widely understood, you could bet that companies would be better prepared. Unfortunately, due to either naiveté or bravado, too many businesses believe they will be able to weather a storm. But for half of them, this is a fatal assumption.

3. Believing that “risk management” only means “buying insurance.”

This is a myth, and it is propagated by…surprise, the insurance industry. Certainly insurance policies are a component of what you need to protect your company, but it doesn’t stop there. There are a host of tools and services you need to manage risk, from disaster recovery plans, to anti-virus software, intrusion detection and firewall technologies, etc. Many insurance providers claim they can supply you with these solutions as well, which leads us to the next biggest mistake you can make: believing them.

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