As the coronavirus crisis has illustrated, in today's dynamic and rapidly changing world, the approach to risk could end up being the difference between a company's survival and its demise.
Sarah Kuijlaars, FCMA, CGMA, an experienced CFO and currently a nonexecutive board member for the UK-based international provider of mobile modular power, temperature control, and energy services, Aggreko, knows this.
The sudden halting of some of the world's biggest economies in response to the coronavirus crisis shows the vital role risk management plays in strategy and operations today. When changes come in today's complex global economies, they often come fast.
"The world is changing so quickly, there's so much disruption that managing risk is even more important now than in the past," she said.
Beyond checking the box
It's important to make others in top positions look at risk awareness as not just something that's part of some cumbersome regulations but an integral piece of a company's operations that could insulate a company from what could be devastating losses.
Management accountants should closely scrutinise how business operations approach areas of risk, whether it's developing plans on how to respond to geopolitical events that could affect operations or looking at how personnel policies are upheld. It also requires keeping those below you accountable and drilling into risk assessments to make sure there is substance behind any plans.
"Encourage risk to be part of the day-to-day conversations and not a check-the-box compliance at the end of the year," Kuijlaars said.
One way Kuijlaars has done this is to encourage top leaders to focus on worker safety issues rather than relying just on health and safety executives. That has meant visiting work sites and emphasising policies that allow and encourage workers to "stop work" when they feel unsafe. Having a top financial leader emphasise this message makes it clear that it's a company priority, she said.
"Practising the 'if not me, then who' personal responsibility is critical to ensure that every employee and contractor gets home safe every day," Kuijlaars said.
Connecting risk with market opportunities
The most effective way to demonstrate the need to plan for risk is to show how it helps the bottom line, Kuijlaars said. No product manager wants to see their newest endeavour fail, and framing conversations about risk in ways that relate to product success can win you important allies, she said.
"Engage in the language the product manager uses to help him or her understand that managing risk is part of managing a successful project," Kuijlaars said.
She suggests shifting the conversation away from what needs to be done to meet the bare minimum of regulations. Instead, show how paying close attention to worker safety plans, vendor reputations, and more can support a successful product launch and better business in general.
Kuijlaars suggests bringing risk management into daily conversations about corporate operations and making sure best practice is put in place. Doing so will mean savings in money and time from accidents avoided and crises mitigated in smart ways because of work done at the front end to anticipate problems.
"There's more acknowledgement today that there's risk around us," she said. "You have to manage that and manage it proactively."
But make sure you are not the person at the table who gives a solid "no" vote to endeavours because of potential risk. You may feel better in the short term to reject a new proposal or service because of the unknown nature of how the endeavour will work out, but that won't help your company in the long term.
"Doing nothing is also a risk, as you can potentially lose market share and shrink your company's reach and revenue," she said.
Kuijlaars suggests keeping an open mind while still emphasising the need to manage and address risk.
Sarah Ovaska is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, FM magazine's editorial director, at Kenneth.Tysiac@aicpa-cima.com.