It is often thought that risk management is about avoiding danger, but the experts understand it’s actually about mastering uncertainty and building organisational resilience. With leadership and commitment, risk management creates value and provides protection for organisations. With robust risk management practices in place, organisations can avoid blind spots and unnecessary setbacks.
So what is the cost of not managing risk?
The cost and negative impact of not managing risk goes well beyond the financial. Almost daily we see incidents and events taking place that have significant non-financial impacts - reputational damage, poor media coverage, Executive and Board level turnover, loss of customers and market share, as well as regulatory and compliance breaches. Let’s examine a couple of examples…..
“Deisel-gate”
- In 2015 it was discovered that VW had deliberately manipulated their emissions tests in some of their vehicles in order to meet regulatory standards
- Their vehicles did not meet the relevant regulatory standards, however VW had fitted the vehicles with a defeat device that could detect when the vehicle was undergoing emissions testing, bringing the emissions down to within the required range for compliance
- During regular driving the emissions were much higher - when real world testing was conducted the discrepancies were detected
- This resulted in VW undergoing prosecutions & lawsuits across the globe, including Australia
- It significantly impacted the trust their customers held with them and resulted in substantial reputational damage
- It was reported in Reuters in March 2020 that Dieselgate cost VW 31.3 billion Euros
Rio Tinto
- In May 2020 Rio Tinto blasted two 46,000 year old rock shelters in Western Australia
- These ancient rock shelters held significant cultural value & significance to the traditional owners
- The blasting totally destroyed the rock shelters and the ancient artefacts held therein
- The laws and regulations in place at the time allowed Rio Tinto to undertake this blasting
- However these actions saw Rio suffering significant condemnation & reputational damage both domestically and internationally
- This plunged the organisation into crisis
- Rio issued an apology for their actions and some senior executives resigned
- Their actions also resulted in a parliamentary enquiry
The Big Question
When making decisions, it is important to ask – have we identified and considered all of the risks we may be facing in pursuit of our business strategy and objectives?
3 Actions you can take to support your management of risks
- Stay informed on regulatory changes impacting your industry
- Learn from others - discuss incidents happening to others to determine if this type of event could happen to you
- Consult with stakeholders – both internal and external – for insights and input
What else should you be asking?
Download our Cheat Sheet of Smart Questions to ask about ERM to support your management of organisational risks.
https://the-mindful-risk-group.kit.com/429c69725e
Reach out if you would like to discuss your organisational risks. We would love to chat with you,
Have great week,
Bron
mob. 0498 631 462