Building a Proactive & Resilient Risk Management Framework

  • March 3, 2023
  • Quantivate

Risk management is a central concern for the financial services industry, spanning compliance, environmental, third-party, and anti-money laundering risks, among other categories.

An effective risk management program should simultaneously support agility and resilience. Agility allows organizations to proactively identify and predict potential risks, while resilience strengthens the ability to efficiently respond to threats or disruptions.

However, gaps in risk management strategies and processes often prevent teams from building a framework that supports a mature program.

Let’s take a look at some commonly overlooked areas:

Assessing Risks to Objectives

Risk assessments are a critical component of an effective risk management framework. However, some organizations don’t have consistent parameters around what they assess and why.

Assessments may involve a repeated process reviewing the same risks or occur too infrequently; however, an effective approach requires intention and consistency. Organizational goals and strategic objectives or plans can present uncertainty, and therefore heightened risk exposure. Risk assessments should be conducted regularly, using a standardized process, and correlate directly with goals and objectives.

Related Reading | Maximizing Risk Results: Combining Qualitative & Quantitative Risk Assessments

The Interconnectedness of Risk

Recognizing how risks interact between business activities, departments, and/or categories is foundational for enterprise risk management. For example, environmental or IT risks may also correlate with vendor risks. Or operational risks such as fraud may create legal and reputational risks.

Too often, organizations invest in complex risk management frameworks but still look at risk in silos. However, risks and their relationships are complex, dynamic, and interconnected; therefore, organizations must quantify risk at the enterprise level to discern what requires the most attention.

Related Reading | 5 Benefits of Integrated Risk Management

An Adaptive Approach to Risk Management

As your organization evolves, so do risks. From internal changes and business activities to external factors like market conditions, third-party partnerships, and geopolitical situations — the sources of potential risk exposure are many and subject to change.

To avoid getting caught by surprise by a shifting risk landscape, proactive risk management requires reevaluating risks on an ongoing basis. Investing in a risk management framework and processes that can adapt to your organization and a changing environment is key to building resilience and successfully navigating uncertainty. 

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