Examination of corporate functions to systematically expose and identify legal, political, economic, social, technological, environmental, reputational, cultural, and market risks as a basis for evaluating their relative significance.
Client Management Concerns and Needs
Companies often have in place a variety of activities, functions, or organizations that address risk. Examples include safety, security, quality assurance, human resources, environmental control, and legal compliance. However, each party in this diverse array of effort uses its own terminology and techniques in addressing its "piece of risk". That dissimilarity precludes a collective, singular, uniform evaluation of exactly how much risk the company faces -- and whether its entirety of risk is being properly managed. All these specialties compete for company resources. Yet they cannot justify, in terms of yield-on-investment, their individual existence! They are simply morally required, having been added over the years to the company's management structure. This dilemma presents company executives with a three-sided problem: (a) how much of the company's limited resources should be allocated to each of these components, (b) how can an executive be certain that company risks are being adequately managed, and (c) how can a singular ranking of all company risks be attained so that the very most important risk, the second most important risk, the third most important risk, et al be available for decision-making? In this perplexing situation, any top executive is held hostage regarding risk exposure.
Work Required to Satisfy Concerns
An objective survey, review, and evaluation of all the company entities that attempt to eliminate, control or reduce the organization's risks is needed. This systematic examination first must ascertain what it is that each entity performs regarding risk, since they often have corollary duties as well. Once those contributions to managing risk are identified, they must be overlaid on the full range of corporate risk exposure – legal, political, economic, social, technological, environmental, reputational, cultural, and marketing – to create a Risk Profile that reveals excesses, shortfalls, and gaps in the company's ability to manage all its risks. This contour then forms a foundation for establishing a systematic program for managing risk.