Risk importance
Following the events in the world financial system during 2008, all organizations are taking a greater interest in risk and risk management. It is increasingly understood that the explicit management of risks brings benefits. By taking a proactive approach to risk and risk management, organizations will be able to achieve the following three areas of improvement:
• Operations will become more efficient because events that can cause disruption will be identified in advance and actions taken to reduce the likelihood of these events occurring, reducing the damage caused by these events and containing the cost of the events that can cause disruption to normal efficient production operations.
• Processes will be more effective, because consideration will have been given to selection of the processes and the risks involved in the alternatives that may be available. Also, process changes that are delivered by way of projects will be more effectively and reliably delivered.
• Strategy will be more efficacious in that the risks associated with different strategic options will be fully analysed and better strategic decisions will be reached. Efficacious refers to the fact that the strategy that will be developed will be fully capable of delivering the required outcomes.
It is no longer acceptable for organizations to find themselves in a position whereby unexpected events cause financial loss, disruption to normal operations, damage to reputation and loss of market presence. Stakeholders now expect that organizations will take full account of the risks that may cause disruption within operations, late delivery of projects or failure to deliver strategy.
The exposure presented by an individual risk can be defined in terms of the likelihood of the risk materializing and the impact of the risk when it does materialize. As risk exposure increases, then likely impact will also increase. Throughout this book, the term impact is used in preference to the alternative word, consequences. This is because the term impact is preferred in business continuity planning evaluations.