Most respondents to the Accenture 2015 Global Risk Management Study say they believe the risk function is an important enabler of long-term profitable growth. They also say that balancing this priority with their responsibility for controls and compliance is a potential barrier to this effectiveness. Yet, you cannot afford to cut corners on risk management. Doing so could harm your operations, employees, consumers, reputations, and so much more.
Risk Identification and Assessment
When starting a risk management program, it’s critical to support your risk managers in undergoing a systematic process to identify risks throughout your organization. Types of risk vary from factors within and outside your control. Unavoidable risk factors could include natural disasters, such as hurricanes, fires, tornadoes, and floods or market fluctuations in prices and interest or exchange rates. Potentially preventable risk factors, to name a few, could include employee injuries; human error; mechanical or internal system failures; shipping, supplier or vendor delays; and consumer litigation.
From the point of view of today’s manufacturer, operational risk management (ORM) is about creating a framework that will help risk managers, employees on the plant floor, and maintenance personnel:
- Understand and manage the risks impacting their organization,
- Establish processes to effectively address these risks, and
- Implement procedures for corrective and preventative actions.
Operational risks can fall into the following broad categories: people, products, processes, and assets. Within these categories, operational risks commonly facing manufacturers today include failure of critical assets, product non-compliance, environmental impact, financial risks, logistics risks, supplier quality, and health and safety issues. These operational risks are highly interrelated, which makes it paramount for risk managers to establish a strategy that transcends functional boundaries while effectively addressing operational risk.
Once you’ve identified all of the risks that could potentially impact your operations, employees, and consumers, assess these risks to determine if you have a safe or dangerous amount of risk. If risk management isn’t embedded in your corporate culture, employees may make mistakes that could compromise quality, lead to product or service failures and place you and those you serve at higher risk. Prioritize these risks to help you first address those that pose the greatest likelihood of threat to your company’s revenue and reputation.
Risk Mitigation and Prevention
A little preparation can go a long way in poising your company for risk management success. Ways you might mitigate and prevent risk include:
- Avoiding loss by not engaging in business practices that pose risk to employees and consumers, such as ignoring safety concerns in product design and manufacturing
- Preventing loss by providing employee safety training and implementing risk awareness and prevention programs throughout your company
- Reducing loss by coming up with plans you could quickly put into place in the event natural disasters or other mishaps occur
- Applying risk management methodologies, such as Failure Mode Effects Analysis (FMEA), Criticality, Accessibility, Recuperability, Vulnerability, Effect and Recognizability (CARVER); Qualitative Risk Assessment (QRA); and Operational Risk Management (ORM)
- Embedding risk management into your quality management system to ensure you, your vendors, your parts and your processes strictly comply with such standards as ISO 9001:2015 and attend to the risk factors you identify in a time-efficient manner
Once you’ve implemented these and other enterprise risk management (ERM) methods, be sure to examine your risk management program on a regular basis to ensure its adequate and effective over time.
Risk Management Solutions
Countless internal and external factors pose risk throughout your enterprise. To effectively manage, track, monitor, and address them, consider implementing a risk management solution into your quality system.
Many risk management solutions are available in the marketplace. Look for an easy-to-use solution that:
- Integrates seamlessly with your current quality system, as well as holistically across your entire organization
- Employs user-definable risk types and risk formulas to calculate low-, medium- and high-risk issues automatically, with intuitive color-coding
- Ensures high-risk issues are resolved with a closed-loop corrective / preventative action process
- Offers risk metrics on a continual head-up display or executive dashboard that offers your critical business managers’ visibility, as well as ability to drill-back to specific risk records
- Makes it easy for you to demonstrate risk assessment management to auditors without having to create complicated forms and reports
Benefits of Managing Risk in your Quality System
A proactive approach to risk management is most beneficial to your business. Now is the time to identify and assess the factors that put your company, products, employees, and consumers at risk. Once you determine these factors, consider implementing a risk management solution into your quality system. The right solution can help you manage risk to avoid, prevent, reduce, and prepare for loss – all while helping you protect your company’s reputation and its bottom line.