Risk management is more important now than ever, according to a new report by the World Bank. “Risk and Opportunity: Managing Risk for Development” points out that a robust risk management plan helps organizations leverage development opportunities even in the face of disaster.
“It is often when risks are mismanaged that the consequences become severe, turning into crises with dire results,” the report points out. Rather than rejecting change in an effort to avoid risk, people and institutions need to prepare for the opportunities and risks that accompany change, the World Bank suggests.
The report is aimed at nations and supports development policies, but its message is relevant for businesses, too.
Here are some of the key points:
- “Do not generate uncertainty or unnecessary risks.”Use metrics and best-practices to develop new policies and actions, and deploy them after careful coordination with others involved to maximize their chance of success and minimize the chance of ineffective policies or implementations.
- “Provide the right incentives for people and institutions to do their own planning and preparation, while taking care not to impose risks or losses on others.”For a program to succeed, employees need a reason for it to succeed and a stake in its success. Ensure that incentives support the desired outcome.
- “Keep a long-run perspective for risk management by building institutional mechanisms that transcend political cycles.” Maintaining a long-term perspective for budgets as well as operations enables organizations to respond as scenarios change.
- “Promote flexibility within a clear and predictable institutional framework.” This enables enterprise renewal in the midst of technological and demand shock. A flexible approach allows appropriate responses to changing conditions without being haphazard.