As a society we are exposed to many risks and threats that affect our physical as well as financial health. In the VUCA world that we live in, the risk of the unknown is the only predictable phenomenon. As human beings, we have an innate need to control the unknown and provide predictability, for our health, our retirement, economic conditions within our hometowns and the globe. A large part of managing our health and finances lies in predicting, analysing and mitigating risks. It is the same for businesses. Risk management is a part of every business and it is now more relevant than ever. Businesses which sail through these difficult times are organisations which have spent considerable time planning business continuity taking in consideration risks of both profit and people at heart of their growth strategy.
Due to the advent of Coronavirus, the risk of the unknown has increased with increasing unemployment, salary cuts, and industries on lockdown with no service which has resulted in the global economy to fall. As per the United Nations,in 2020 alone, the Global unemployment rate is projected to increase by around 2.5 million and almost half a billion people are working fewer paid hours than they would like or lack adequate access to paid work. The impending crisis has not only affected individuals but has also impacted many business and industries.
Sectors and businesses experience phases when the teams cannot predict every downturn, stock market crash, catastrophe, or data breach or loss of revenue that comes with it. Identifying hypothetical scenarios of the unknown, it's possible to identify many risks long before they can cause a problem. Carefully mitigating risks with well trained risk managers can play a very crucial role in ensuring survival of businesses.
With the economic downturn coupled with the crisis of a pandemic, it is time that business schools take a note on incorporating risk management in their curriculum. Students can specialize in any industry or field of choice but risk management must continue to be an important element across industries.
As we emerge into the new normal, our future work force should be trained to predict the future by doing a thorough analysis of the business environment, make radical changes in business to adapt to the evolving environment needs and develop a people first approach. Students can enhance their skills in matters of corporate governance and formulate effective business continuity plans. Future leaders should create a new work environment for all businesses to recover from the domestic as well as global crisis such as these.
Making the future leaders effective risk managers requires adequate counsel at an early stage. Business graduates with knowledge in risk management can determine the risks that are not apparent to the entire business fraternity. They can classify threats basis on the level of their urgency to avert the same. One of the major responsibilities of a risk manager is to provide the right counsel. They need to act as advisors to the c-suite level and provide them with the adequate insights and support to manage crisis. Risk managers need to come up with a way forward for the organization, making senior management aware of the market trends in time. For example in the education sector, one can anticipate a vast shift in digital learning and future of technologies playing a crucial role in a student’s academic time and learning process. How prepared schools, colleges and universities are to take on the change comes from the plans and execution of risk managers. Another important factor of risk management is to reduce business liability on financials, assets and expenses that the organisation may or may not have to incur during the crisis. Further to this, risk managers formulate policies that can shape the future path of the organisation by mitigatating unseen risks.
In a business environment, it is not always possible for organisations to be wary of the losses or deficits. Taking into account financial risks, business can also face emotional turmoil with stakeholders involved from employees to investors. Besides, working out of financial slumps during crisis, leaders should also keep in mind the well being of their employees and their future for smooth operations.
An effective risk manager can connect to all levels of people involved in a business to ascertain their views and recommendations to overcome the business challenges to situation. Future business graduates with risk management skills will be valued in the new business environment. They will hold the keys to newer ways of running business smoothly amidst limited resources in crisis. The article has been contributed by Prof. Dr. Uday Salunkhe, Group Director, S. P. Mandali’s Prin. L. N. Welingkar Institute of Management Development and Research (WeSchool).
[This article has been reproduced with permission from Welingkar Institute of Management Development and Research (WeSchool)]