Risk Management FAQs

Risk management is a systematic process that involves identifying, assessing, and mitigating threats or uncertainties that can affect an organization.

An operational risk is the potential for financial loss within a business due to failures in internal processes, people, systems, or external events, essentially meaning the risk of loss arising from inadequate or failed internal operations, including human error, system glitches, or external disruptions like natural disasters.

Operational risk management (ORM) is a continual cyclic process that includes risk assessments, risk decision-making, and the implementation of risk-based controls, which results in acceptance, mitigation, or avoidance of risk. ORM is the oversight of operational risk, including the risk of loss resulting from inadequate or failed internal processes and systems, human factors, or external events.

Here are some common culprits that startups should be aware of: 

• Lack of product-market fit 
• Competitors—both new and emerging—can eclipse a company before it’s well established
• Scaling too quickly before the company has structure in place can result in detrimental effects
• Overdependency on a founder or key player can easily threaten a young company’s survival
• Compliance oversights or infractions can have disastrous consequences for a new company

Start with identifying what you can’t afford to lose. Look at your strategic priorities as well as your targets for growth and market share, and then ask: What could threaten our goals? A technology failure? A weather event? A cyberattack?  

With this list of potential scenarios:

• Assign each one a likeliness score (i.e., from 1 to 5, with 5 being the most likely).
• Create an impact score based on things like brand reputation and revenue loss, with a high score signifying the greatest predicted impact. 
• Multiply those two scores to get a risk score you can use for prioritization. The highest score should be the highest priority. 

A strong risk culture comes from the top. Companies led by executives who embed risk as a strategic priority typically demonstrate more resilient and mature risk cultures. Leadership has to invest in the staffing, technology, and communication necessary to continuously stay ahead of threats. Employees need to be educated, trained, and incentivized to pay attention to risk, notice any vulnerabilities, and report them immediately.

The board establishes a company’s risk tolerance and works with its C-suite to set down a risk appetite statement that aligns with strategic goals. Using key risk indicators (KRIs), the board can establish clear risk boundaries that reflect the stated risk appetite. Once all of this is in place, the board regularly reviews risk exposure to determine whether the organization is staying within its set limits.

Purpose-built risk management software enables you to include your entire enterprise in your resilience efforts, eliminating the problem of siloed efforts. By centralizing and connecting all your data and by providing up-to-the-minute monitoring as well as streamlined dashboards and reports, risk management software gives you true insight and visibility. This allows you to identify gaps and threats, understand dependencies, strategize ways to prevent and recover from disruptions, and even test your responses to ensure you’re always ready.