Even within the context of governance, risk and compliance (GRC), the concept of risk often carries negative connotations. Perhaps it’s human nature - sheer survival instinct - to see threats, vulnerabilities and potential pitfalls, before we recognise opportunities. For forward-thinking GRC professionals however, the ability to balance potential ‘risks v rewards’ calls for positive risk-taking.
Positive risk-taking refers to the process of identifying and pursuing risks that, while uncertain, have the potential to bring significant benefits and opportunities. It’s about finding equilibrium between mitigating potential downsides and leveraging opportunities for growth, innovation and competitive advantage.
The ability to embrace positive risk-taking will depend largely on an organisation’s risk culture. Again, the ‘positive’ descriptor applies, but what does ‘good’ risk culture look like?
According to the Institute of Risk Management (IRM), the UK’s leading professional body for Enterprise Risk Management (ERM), an effective risk culture ‘enables and rewards individuals and groups for taking the right risks in an informed manner.’
‘Risk culture is a term describing the values, beliefs, knowledge and understanding about risk shared by a group of people with a common purpose, in particular the employees of an organisation or of teams or groups within an organisation. This applies whether the organisations are private companies, public bodies or not-for-profits and wherever they are in the world.’
Institute of Risk Management (IRM) (theirm.org)
Why is risk culture so important?
Since every organisation needs to take risks to some degree to achieve objectives, its prevailing risk culture will dramatically influence its approach to risk management – fundamentally the ability to make risk-based decisions and meet performance goals.
The IRM cautions against complacency or a risk culture that’s ill-considered or unsuitable. ‘These organisations will inadvertently find themselves allowing activities that are totally at odds with stated policies and procedures or operating completely outside these policies. An inappropriate risk culture means not only that certain individuals or teams will undertake these activities but that the rest of the organisation ignores, condones or does not see what is going on. At best this will hamper the achievement of strategic, tactical and operational goals. At worst it will lead to serious reputational and financial damage.’
Balancing risk-taking to objectives and opportunities calls for skill and best practice. Here’s how GRC professionals can effectively navigate the way forwards:
Align risk appetite with strategic goals
Define risk appetite
Clearly articulate the level of risk your organisation is willing to accept in pursuit of its objectives. This sets a foundation for decision-making.
Strategic alignment
Ensure that the risk appetite aligns with broader strategic goals. This alignment ensures that risk-taking is purposeful and directed towards achieving key business objectives.
Implement robust risk assessment processes
Identify and categorise risks
Develop a comprehensive risk register that includes known risks, interconnected risks and potential opportunities.
Evaluate impact and likelihood
Use qualitative and quantitative methods to assess the potential impact and likelihood of each risk. This dual perspective helps prioritise risks that could significantly influence objectives.
Foster risk-awareness and a ‘positive’ risk culture
Encourage open dialogue
Promote a culture where employees at all levels within teams feel comfortable discussing risks and where value could be gained through risk-taking. Open communication fosters innovation and allows for a more comprehensive understanding of the risk landscape.
Ongoing training
Regular training sessions can help employees understand the principles of positive risk-taking and how it applies to their roles.
Leverage technology and data analytics
Advanced analytics
Use data analytics and predictive modelling to gain deeper insights into risk trends and to identify potential opportunities. Technology can help identify patterns that might not be immediately evident.
Real-Time Monitoring
Implement systems for real-time risk monitoring. This proactive approach allows for swift responses to emerging risks and scope for gains.
Establish strong governance frameworks
Policy development
Design policies that guide risk-taking behaviours, ensuring that they are aligned with the organisation’s risk appetite and strategic objectives.
Compliance and monitoring
Regularly review compliance with risk policies and adjust them as necessary as circumstances change and opportunities present themselves.
A risk-free solution
Decision Focus GRC software can help you making informed, strategic decisions that balance the potential downsides of risk-taking with the pursuit of significant opportunities for growth and innovation. Get in touch to book a demo of our award-winning, no code solution today.