Proactive risk management begins with assessing potential risks, identifying the drivers connected to their root cause, and then calculating the probability of: Once risks have been identified and traced to their root causes, contingency plans can be developed to prevent future risks that have not yet occurred as well as minimizing the likelihood of repeated risk impacts from the past. Maximize Your Procurement Power and Minimize Your Risk Exposure with PurchaseControl, by Lyle DelVecchio | Oct 25, 2019 | Business Strategy, Stay up-to-date with news sent straight to your inbox, Sign up with your email to receive updates from our blog. Implementing a comprehensive, cloud-based procurement software solution like PurchaseControl can make achieving optimal proactive risk management faster and easier to integrate with your existing workflows, policies, and software environment. Reactive risk management strategies can cost your company plenty in the form of lost profits, damaged reputation, and impaired competitive performance. Enter your email below to begin the process of setting up a meeting with one of our product specialists. Constant and complete communication of risk exposure to all relevant parties to ensure total transparency with regard to the company’s past, current, and potential risk exposure. Delivering effective and proactive Risk Management needs an organization to have more clarity about the breadth of risks facing the business and understand the potential threats and opportunities in alignment with the overall business strategy in order to plan appropriate mitigation action. Improved decision-making through more accurate and complete business intelligence, further reducing risk while revealing areas in need of improvement and potential opportunities for growth, partnerships, and innovation. With data analysis becoming an essential part of effective planning, promotion, and, yes, procurement, companies can no longer afford to take a reactive approach if they want to stay competitive and compliant. Companies are making deliberate efforts to improve their risk management programs to meet both business and regulatory demands and to create greater business value as well as ensure sustainability. Proactive risk management improves an organization’s ability to avoid or manage both existing and emerging risks and helps adapt quickly to unwanted events or crisis. It helps build an understanding required to measure and manage emerging risks which give organizations a better view of tomorrow’s risk and how it impacts their business. Then, the software team establishes a plan for managing risk. Reactive risk management strategies are used to create preventative measures against known risks, but not relied on exclusively as a shield against future risk. Proactive risk management lets companies anticipate and control (or even eliminate) potential risks before they can damage the business, budget, or bottom line. Leaving reactive risk management behind to develop a risk management program for the modern business begins with the right tools. “To preserve competitive advantage, address safety concerns, and protect current and future profitability requires a more forward-thinking style of procurement management. Ultimately, the most effective approach to risk management lies in anticipating and planning solutions for risk, rather than attempting to minimize the damage after the fact. ). Proactive Risk Management is not a process or an initiative but a discipline that an organization has to practice and make an integral part of the overall business strategy. Complete transparency for spend data, eliminating rogue spending and inhibiting both invoice fraud and theft. Using a centralized solution solidifies and simplifies risk culture company-wide and allows you to use risk management methods such as process automation and AI-supported data analysis across all business units to achieve: Of course, even the most powerful tool can only do so much good without human guidance at high levels. © 2020 MetricStream Inc. All Rights Reserved. It cannot be defined in a day and cannot be performed in isolation. Incorporates creative problem solving, predictive analysis, and a focus on root causes of risk, leveraging deep analysis of past, current, and future data sets to identify relevant risks before they occur, and develop contingencies for unforeseen as well as established drivers of risk. We just need some information from you so our specialists know how to assist you better. It should identify existing as well as potential risks so that, when a threat or incident of any kind presents itself, risk managers know how to react to minimize harm to the business. Leveraging Technology to Build a Strong Risk Management Program. Organizations need to relook at their approaches and perspectives to be able to manage unavoidable risks in a controlled and effective manner as well as make faster and better business decisions. Education and training to ensure internal compliance with risk identification and mitigation strategies and ensure full buy-in for technological tools and software that support a proactive approach (e.g., purchasing software, data analytics suites, information management dashboards, mobile applications, etc. In addition to the right tools, you need the right risk management strategy built on continuous improvement. Developing and implementing a preventive risk identification and management program helps businesses limit exposure, save costs, and enhance value for stakeholders. Unlike most of the “p-terms” that get so much press in modern procurement—productivity, profitability, process automation, etc.—one term that often seems to get short shrift is proactivity. However, there are challenges that need to be managed before seeing the results of such approach, for example, lack of clear understanding about the spectrum of risks and consequences, lack of relevant tools and techniques, availability of data in silos, limited resources, and absence of tone-at-the-top. A proactive strategy begins long before technical work is initiated. This field is for validation purposes and should be left unchanged. Identifying and mitigating risk helps businesses in a number of important ways, including: Ultimately, the most effective approach to risk management lies in anticipating and planning solutions for risk, rather than attempting to minimize the damage after the fact. Is akin to closing the barn door once the horse has already left. Traditionally, risk management programs have taken a reactive approach to risk assessment. This brings to the fore a high level of uncertainty, adding to the organization's risk exposure. Improved collaboration and communication between all stakeholders, from staff to suppliers. But proactive risk management can and should include predictive strategies. To preserve competitive advantage, address safety concerns, and protect current and future profitability requires a more forward-thinking style of procurement management. Proactive Risk Management – Identifying And Avoiding Risks, Greater agility and flexibility in addressing both opportunities and challenges, Continuous process improvement through analysis of historical, current, and predicted data sets, Improved decision making through greater awareness and mitigation of risk drivers.