Most businesses can thrive quite well as long as the economy and environment remain healthy. We only learn about corporations that use excessive leverage or take on excessive risks during a financial crisis. The 2008 financial crisis was one such incident; many enterprises that had taken on excessive risk when times were good ended up collapsing. The current pandemic is another example of a comparable crisis that has highlighted many companies' worst weaknesses.
Numerous firms recognized that their risk management frameworks fell short of industry standards. It's clear to see why the majority of static risk management software fell short of expectations in 2020. Generally, the risks that firms must control do not vary very frequently. While static risk management frameworks exhibit several limitations under normal circumstances, their performance is nonetheless considered adequate by the majority of enterprises. The pandemic, on the other hand, demonstrated all the disadvantages of organizations relying on out-of-date technology to handle risks.
How the Pandemic Changed the Nature of the Game
One of the most critical concepts for any risk manager to grasp is that the pandemic is not a single risk that must be addressed. The pandemic is a significant worldwide occurrence that has introduced numerous new hazards and challenges that must be carefully addressed. This is also why static risk frameworks struggle to keep up with the new threats that develop and evolve as the pandemic progresses.
What makes managing the epidemic so tough for many organizations is the fact that it is always evolving and changing. These changes were triggered not only by the virus itself, but also by the local and federal government's response. Cities experienced varying degrees of infection and governments responded in markedly different ways. Some states implemented complete lockdowns, while others just requested residents to follow standard operating procedures but did not enforce them initially. As more data became available, many states altered their strategy and adopted new rules and policies requiring businesses to adhere to in order to continue functioning during the pandemic.
This required businesses to constantly monitor new rules and regulations, as well as new data regarding the epidemic, in order to ensure that their own response to the pandemic was appropriate. This meant that the risks that a business was attempting to mitigate or manage were constantly shifting, sometimes in a matter of weeks. Any organization that continued to use a static risk management system that took months to discover and assess developing risks found itself without the tools necessary to manage risks to their business efficiently.
The Benefits of a Framework for Digital Risk Management
Organizations that used agile risk management technology had a significantly different experience managing risks during the pandemic than businesses that continued to use a static risk management framework. Risk management technology-aided them in assessing risks instantaneously, forecasting developing threats based on data trends, and providing real-time risk measurements. This meant that rather than spending significant time just understanding the risks affecting the business, these organizations focused the majority of their time ensuring that all risks identified by their risk management framework were mitigated as fast and efficiently as possible.
Making the Transition from a Static to a Dynamic Framework
The good news for any firm is that if it is currently utilizing a static risk management system, migrating to a dynamic framework is considerably easier now. The advent of cloud solutions means that firms can swiftly install a cloud-based, out-of-the-box, purpose-built risk management solution rather than investing hundreds of thousands of dollars and 12 or more months. Cloud solutions do not require on-premises hardware or resources and instead function in the cloud. This considerably minimizes implementation and management expenses, as well as the time required to establish such a system.
Certain cloud solutions on the market might be delivered within a few days. This means that any firm now dealing with its risk mitigation framework can potentially convert the entire framework in weeks, rather than months or years, and rapidly begin receiving the risk intelligence and metrics they require.
Risk managers are able to generate a lot more value for organizations when they have powerful tools that can be used to monitor, manage, and mitigate risks. Risk technology helps businesses gain a deeper understanding of the risk exposure of the organization. It also helps them to deliver better services to customers and create better relationships with regulatory agencies through better reporting.