The Power of Enterprise Risk Management
Understanding Risk
Every organization encounters risks, but not all risks are negative. Avoiding risk entirely can limit growth and prevent an organization from reaching its full potential. Instead, organizations must learn to navigate and manage risk effectively.
Risks generally fall into four main categories:
Strategic risks
Operational risks
Compliance risks
Financial risks
Strategic risks involve high-level threats that could impact the organization's long-term objectives. Examples include shifts in customer behavior, the lack of a succession plan, or inadequate board oversight. Operational risks relate to internal and external factors that affect day-to-day functions. These include personnel challenges such as high turnover or the loss of a key team member as well as external threats like natural disasters. Compliance risks deal with regulatory and law-based threats, such as labor laws, data protection, OHSA rules, and ethical compliance risks. Finally, financial risks cover any risk that deals with money, such as market risks, liquidity risks, investment risks, and fraud risks.
The Value of Identifying Organizational Risks
Organizations that actively engage in risk management and take the time to understand potential risks are better prepared to handle challenges if and when they arise. A structured risk management process uncovers hidden threats and assesses their potential impact on the organization.
The first step in the risk management process is to identify the risk. Once identified, the risk is assessed based on its likelihood of occurring and the potential impact if it does. After this assessment, risks are prioritized accordingly. For example, a risk that is unlikely to occur and has minimal impact would be a low priority for an organization. In contrast, a risk that is encountered daily and could significantly impact the company would be placed at the top of the priority list. Once priorities are established, the organization can then allocate resources effectively.
How Can Hantzmon Wiebel Help?
At Hantzmon Wiebel, we offer online diagnostics for both businesses and nonprofits, allowing you to get a preliminary assessment right from your computer. We then guide you through the enterprise risk assessment process. By proactively identifying and managing risks, organizations can safeguard their operations and position themselves for long-term success. With Hantzmon Wiebel’s expertise and resources, you can take a strategic approach to risk management, ensuring your organization remains resilient and prepared for the future.
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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.
