The Increasing Importance of Enterprise Risk Management

Undoubtedly, the current global contingency has shaken the operating model of companies in various sectors. This confronts us with a reality previously unthinkable for many of the businesses that had not developed sufficient capacities. 

From a business perspective, the impact of the pandemic has left companies in various positions: 

  • Businesses that have suddenly lost relevance and even viability. 
  • Sectors with unstable structures and vulnerabilities that are sustainable in the short term, and that require transformation to regain relevance. 
  • Business groups whose recovery will be closely linked to the reestablishment of the economy. 
  • Companies in which structural changes have accelerated their growth. 

The sectors that foresee the greatest losses in 2021 are: 

  • Hotels and Tourism 
  • Outsourcing 
  • Media 

In contrast, those who expect to have incomes greater than or equal to those of 2019 are: 

  • Health 
  • Electronics / Software 
  • Consumer / Retail 

In this context, issues such as the digitization of services and the automation of processes are heard more as an urgency than as a vanguard project. 

In any scenario, it is relevant to review the strategy and the essential elements of the model to be implemented. To accelerate transformation initiatives that make it possible to exploit current advantages, create new ones, reduce disadvantages and even redesign models.  

Relevance of risk management in the new reality 

In this environment, risk management emerges as a unique tool capable of providing information on external and internal issues and their favorable or unfavorable influence on the business. This situation challenges the leaders of these initiatives, since they must approach them with different thinking approaches from those used before the health crisis, with a level of depth and clarity that leads to creating initiatives, reinforcing current ones, and above all promoting coordinated action in all management layers and from all pillars of the business: strategic, operational, and human resources. 

To achieve this strategy, it is worth analyzing how the "terrain" was left, the pillars that we considered relevant and, above all, the level of influence of external aspects such as: market for our products, new consumption habits, new regulations, new requirements of health and safety, supply chains and sources of financing, among others. 

Likewise, it will be worthwhile to constantly monitor the direction taken by the different areas of the operating model and the qualities to maintain and develop to follow the company's objectives. Aspects such as: 

  • The availability and quality of resources in the supply chain 
  • The capacity of the production processes themselves 
  • Process digitization and automation 
  • Customer experience
  • Infrastructure physical security 
  • Availability of technological resources and cybersecurity 
  • Talent health and safety 
  • Flexibility in work schemes 
  • Reconfiguration of models 

Undoubtedly, the reconfiguration of business models and strategy will be present in the business dynamics for 2021. Businesses will have to create new supply chains, create more backups and failsafe measures for existing processes, and much more. It will be critical to ensure that the business can survive something like what happened in 2020 if it happens again.  

There is a great adage that there are never two of something – there are things which do not exist in the universe, there are things which are unique and therefore only 1 exists in the universe, but if there are no things which are only 2 – if there are more than 1, there will be many. The same is true for the pandemics. We were lucky that there was no such pandemic, but we now know it is possible and we need to be prepared for it. 

Dynamic risk analysis models 

Likewise, it will be important to structure dynamic risk models that analyze the evolution of current risks, study potential links between risks and the impact that in combination they may have on the organization. Models that include as a natural part of the process being alert to emerging risks; as well as the analysis of business opportunities that arise in changing environments such as those we already lived in and whose dynamism will sharpen. 

Integrated approach to management 

That the risk management model leads to a dynamic of operational execution integrated in all its elements and in all its management layers will be relevant to achieve a greater degree of flexibility in the operation, and thus increase the possibilities of achieving objectives in changing environments.  

An appropriate risk management solution would be a useful tool to keep the business on track in a changing and uncertain environment, as well as igniting the right engines in strategy execution to take advantage of strategic advantages, reinforce critical management areas and even reconfigure the operating model. In this scenario, the leadership of the Board of Directors will be essential to obtain the greatest benefits from the program. 

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