Rashmi, software consultant of Unichrone, loves to write educational topics that aspire young minds and professionals.
Covid-19 has registered a dreadful impact across major industries all over the world. According to a recent report, the world’s richest people lost over $200 million due to the COVID pandemic. This unprecedented pandemic doesn’t know any social and racial boundaries and is having a catastrophic effect on vulnerable-landless labourers too.
Scientists and researchers have confirmed that Covid-19 will be continually evolving and the impact will be considerably long-lasting. This statement from officials has provoked the organizations to work on safety measures to lay the foundations for long-term growth and help to restore the economy. Many organizations have been developing risk reduction strategies specific to this crisis and are now looking ahead.
What is Risk Management Plan and Why is it Important for your Business?
A risk management plan is a map to identify, analyze, and mitigate threats and risks from a variety of sources including legal liabilities, strategic management errors, financial uncertainty, accidents, and natural disasters. Drafting a practical risk management plan is crucial for organizations under various categories especially IT, transport, supply-chain, healthcare, data privacy, and other digitized companies. It becomes a top priority for them to act against IT security threats, data-related risks, cyber threats, and finance forgery by making a plan with risk management strategies.
Implementing a robust risk management plan in your organization enables you to foresee the potential threats and events before they occur, thus you become more confident in making business decisions and help to reach short and long term goals. A risk management plan, if crafted correctly, creates a safe work environment for the employees, therefore, helps to increase the stability of business operations. Insurance is the elements of risk management plan that helps defray the effect of negative risks. In most organizations, be it finance, health care, or engineering sector, the risk management department is separated to continually update and monitor the safety measures which have already been drafted. The risk management department incorporates exclusive goals, leadership, and scope.
Types of Risk that Business is facing amid COVID
Strategic Risk: Due to the unprecedented crisis, the pre-planned strategies have become less effective, as a result, organizations struggle to reach their goals. The shifts in customer demand, the decline in the buying ability, and spikes in the costs of raw materials and some other economy and situational reasons result in this strategic risk.
Compliance Risk: Is your organization ready to adapt to the new necessary laws amidst of COVID outbreak? WHO and other federal bodies have issued new norms and guidelines to maintain essential health services in organizations with a specified number of employees. Number of employees permitted to work, social distancing, health safety measures, and other precautions are some to be found in the list. Hence, it’s obvious that organizations that follow a set of regulations will change their perspectives towards new systems and policies.
Financial Risk: COVID has poorly affected the international economy and led to a complete shutdown of import and export trades. Hence, it is anticipated that companies will be facing financial risks in terms of extra costs and loss of revenue. Customers are the source of income for many organizations. When customers lose their buying capacity, companies will have a significant financial risk. For instance, if the customer is unable to pay or delays the payment, your business will be in trouble. This is what organizations facing now due to COVID, and it’s high time to build a financial risk plan that could keep your business secure from financial risks.
Operational Risk: As COVID continues to spread, the countries put their people on various forms of lockdown. As a result, companies suffer from a shortage of employees. This will create an unexpected failure in your company’s day-to-day operations. Natural disasters, power cuts, and problems with your website host are the major operational risks, but as I’m writing this, the biggest annoyance for companies is the shortage of employees due to the pandemic.
Post Covid-19 Risk Measures to Consider
This unprecedented crisis has given us a great opportunity to oversee, anticipate, and manage risks with advanced measurements to achieve defined economic growth with substantial development. Listed out here are the possible measurements to be taken for the risks created due to the COVID pandemic.
1. Fraud Risks
As the pandemic forces millions of employees to work remotely, an organization needs to make sure their employees work safely and don’t fall prey to fraudulence.
Measurements: To get away from a phishing scam, organizations could reassess and update the fraud risk existing controls, make use of the AI automation tools and improve the fraud risk awareness among the employees.
2. Cyber Risks
Cybersecurity becomes more crucial as the number of cybercrime increases. To put it across, remote working prone to cyber-attacks and vulnerabilities that could lead to data loss/ leaks. So it’s more imperative to have a cyber risk plan in hand and implement security practices in place.
Measurements: Construct irresistible cyber resilience, build a network architecture that includes safe alternatives for remote working, educate your employees about the risk management factors, and make sure your cybersecurity is complying with the security standards.
3. Physical & Mental Health Risks
Employee’s wellbeing should be given priority since their contribution is the major key to achieve the goals. Consider to achieve and balance both employees’ mental health and risk reduction.
Measurements: Organizations can approach the risk management department to update the safety protocols and code of conduct in adherence to the WHO guidelines. This includes safe work practices, health improvement training, awareness, and operational procedures.
4. Contractual Risks/ Complications
Since contracts are legally binding companies avidly work to fulfill every obligation within the set terms and timeline. But things have entirely changed now. Due to the COVID outbreak, even multi-billion dollar companies feel it hard to fulfill contract commitments this may leave their company at risk.
Measurements: As a part of your risk management department, establish a legal section to perform contract analysis by outlining the situation and measurements to adapt the clauses for new contracts.
5. Reputation Risks
Due to the cancellation of contracts, improper communication companies might have gained notoriety from the customers and clients. This could block potential projects coming in.
Measurements: Plan for a better crisis management plan that will leverage the entire management system to do better. Prepare your team of employees for effective communication and showcasing excellence in crisis management.
6. Supply Chain Risks
Travel restrictions and border closures have created a colossal inconvenience for transport and supply chain activities. The shortage of critical goods and loss of availability of raw materials have created a void for the production department.
Measurements: Prepare a team of members for effective communication with key suppliers to acquire a flexible distribution of materials. Diversify the supplier/ distributor network and employ supply chain technologies for effectiveness.
7. Social and Political Instability
Countries witness social and political instability in recent times. Some activities, be it import/ export, be it a tax, trade, and compliance, definitely require political attention and approval. Here, companies might face risks, pressure, and dominance from regulatory bodies to get things done.
Measurements: Create a trusted line of communication with regulatory bodies, and encourage open communication between employees and management about rules & guidelines.
Building a Risk Management Plan: Overview
- Establish the key objectives: Understand, describe and define the decision, determine the team members to be involved in the risk management, identify the decision-changing factors and establish formal terminology
- Do a risk assessment: To make sure the goals are clearly defined, made visible in the organization, continually improved and executable risk assessment is crucial.
- Develop alternative strategies: Alternatives for risk reduction approaches and management policies for its implementation
- Implementation of chosen alternatives: Implement mitigation strategies and develop metrics to measure the effectiveness
- Monitor the performance: Verify if the result comes as expected by testing, crew training and implementing
The spread of the Covid-19 pandemic is slowing down and some countries have managed to flatten the curve. This offers a sparkle of hope! However, it is anticipated that the business will be prone to massive cyber risks and vulnerabilities in the upcoming days. Therefore, every organization needs to update a risk management plan incorporated with Covid-19 risk reduction strategies to secure the business from potential frauds and IT/ security risks.