Updated April 26, 2023
Risk Analytics Helps In Risk management – Economic uncertainties have impacted the functioning of companies and brands across categories and types. While short term economic uncertainties might not impact the growth of the company, when this continues for a longer duration it can result in unemployment, increased costs, reduced disposable income and in turn increase the number of risks that a company might have to face. This has also affected the entrepreneurial spirit of the company, where now they are vary of investing in campaigns and policies that might seem risky, even to a slight degree. Now, companies are having a new outlook towards managing risk so that they can continue investing in campaigns that are creative, engaging and interesting and above all do not sustain a loss.
What is risk? And why it important for companies to manage them?
Risk is a major cause of apprehension in any company. By identifying risks and managing them in an effective fashion is now of the major concerns of any business. When companies can manage their risk in an better manner, they can take business decisions in a much more confident manner. Becoming knowledgeable in the field of risk taking is extremely beneficial for companies as it can help them not just deal with problems in an uncertain environment but also deal with problems, even before they arise. In a survey conducted by advisory firm PPB, risk is defined in the following manner: “Organisations face internal and external actors and influences that make it uncertain whether, when, and the extent to which they will achieve or exceed their objectives. The effect this uncertainty has on the organisation’s objectives is risk.”
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For brands and companies, risk can originate from two sources, mainly internal and external. External risks comprises of those that are not in the hands of the companies and include factors like political changes, drop in exchange rate among others while internal risks can include non-compliance or information breaches. These risks can act as major hurdles in the path of a company achieving their goals and targets. Further, when companies do not take into consideration the chances of risk, they tend to lose direction when their plans do not work out accordingly. It is therefore a good idea to add a risk management team to your company as this will help them mange and mitigate risks in a better manner.
The main role of risk management team would be to help companies to recognise the risks and come up with plans that will if not remove but reduce the risk of accomplishing goals in an effective manner. the team cam also encourage employees of an organisation to work together to successfully implement the said strategies. Additionally, when companies are bigger in size and operations, they require a team that can come up with specialised plans and programmes.
The risk management team of a company is also responsible for making a list of the risks and determining their level of criticality. The more critical they are, the more adverse impact they can have on the functioning of a company and therefore the more critical they are, the more attention they require. In short, the whole point of risk management is that companies take only that level of risk that will help them achieve their goals, without leading to wastage of resources or time.
A good risk management policy is therefore essential for ensuring continuous success and growth of a company. This is because a comprehensive risk management policy will help a brand make a good SWOT (understand the strengths, weaknesses, opportunities and threats that are a part of any campaign or plan of a company) analysis report. The importance of a strong SWOT analysis can never be undermined at any stage. It is like they say that “winners recognise their limitations but focus on their strengths; losers recognise their strength but focus on their limitations.” When people are aware of their weakness, they can convert it into their strengths.
At the same time when brands are aware of the opportunities available to them, they can make use of them and also deal with possible threats in a sustained manner. Successful project managers know how to ensure the success of their campaigns by effectively handling the risks associated with it and identifying and reducing problems associated with the projects. A good plan has four important sections namely planning, preparation, result analysis and evaluation. Together, they can help companies to not just evaluate their past success/failure but also plan their future path of progress as well.
How can risk analytics help companies to manage their risk?
Today, industries and economies around the world are becoming bigger and more complex in every possible manner. This has resulted in the creation of data that is unprecedented in terms of velocity, volume and variety. Despite this, data is available at the click of a button, thereby opening doors of unlimited possibilities which can be analysed in a real time manner as well. With growing acceptance, Big Data is growing more and more popular. However there is still a lot of risk involved as the full power of this industry is still to be unleashed and discovered. Despite having revolutionary potential, Big Data still has a lot of challenges that needs to be addressed. Some of the ways in which Big data can help companies is by improving system response time and effective usage of resources, provide better risk coverage and at the same time save resources both human and capital. With Big Data, munging risks takes on an altogether new dimension than ever before.
The competition among brands on every level from local to international is increasing at a rapid pace. If brands cannot keep up with the increased pace of competition, their chances of falling behind is very real because staying ahead in the market is no longer an easy task. That is why companies and brands will always have to be on a lookout for technology and policies that can provide them a superior competitive advantage. This is extremely important for companies that want to succeed in this time of high competition.
Another way to stay competitive is by applying these new technologies and capabilities to concepts that exist like risk management. Risk management has been around for many years and with the emergence of big data, it is possible to integrate the two together to give companies and brands an altogether new value and create better opportunities for them as well. With so much potential in risk management, it is possible for brands to not just ensure that the plans of the companies are insured at every stage but also that brands are able to create smarter strategies that can realise goals and objectives of the said brand.
The growth of data and risk management is interconnected
The discipline of risk management has been around for many years, but it is only in recent times has it come into the limelight. With so many trends and developments, it is possible for enterprise risk management to become even more advanced and innovative. As mentioned before, data has grown at a rapid pace that continues every single day. Companies are today swamped with data that come from almost all possible direction. However all the data that a company receives is raw in nature and without any insights gained from them, they are actually useless.
Only when brands can make sense of the data, can it be used in any manner. The good news is that despite the fact that the amount of data have grown at a rapid pace, so also has the hardware that is used to contain them decreased at a similar pace. For example the cost of hard drive has decreased by almost half in the last ten years and this continues eve today. What is more is that with the emergence of technologies like Cloud, the cost of hardware can easily be ignored because online technologies have the power to store huge amounts of data at very low prices.
So while storage of data is no longer an issue, the problem of managing and analysing data still remains. As the amount of data is almost limitless, it is not possible for a single person to manually analyse them in any manner. Another major problems that exist is that with such exponential amount of data, it is difficult to find that data that is helpful and relevant, which can get lost in the greater amount of useless and irrelevant data.
Effective data management is therefore a very critical so that companies can make use of the multiple opportunities that exist in the flood of data, that are currently housed in companies and organisations across the world. Risk analytics therefore has a very important role to play in helping companies make sense of the wide amount of data available to them and from them create policies that can help them realise their goals and objectives. With so many tools and techniques that are available to companies, this task has definitely become easier.
Big data is a major player in the industry
One field that can help them make sense of the growing amount of data is big data. Big data can help to create an entire ecosystem that can manage even the biggest flow of data in an effective and efficient manner. As big data has a number of tools and technologies, they can help brands to move through large amounts of data and pull together important insights which might not be visible in the first go. While performing such actions, it is important to reminder that generating actionable information is the main goal of this entire endeavour. This information must reach the concerned person not just in a form that they understand, but in the right time and place as well.
This means that analysts who are handling the said information might be able to understand the technical language, the same cannot be said for others within the organisation. That is why it is extremely important that when the information reaches the executives, it is in a language that they can easily understand. A good way to ensure that an open line of communication is maintained within the organisation is through a feedback mechanism. This means that users of the information have a way of communicating with the creators that the information that they receive is correct, understandable, sufficient and timely.
Many estate analysts will agree that location is the single most important factor in their industry, similarly data analysts will agree that data is the single most important factor in risk analytics. Good and important data can sometimes make up for mediocre analytics but if a company has the most expensive analytic system but are stuck with poor data, then it is of no use to them. The best way forward for companies is therefore by leveraging and collecting useful data in a systematic manner. While every company produces vast amounts of data, it is important that they collect and manage it through a competent method. For that companies should look towards social media, government data sources and third party vendors so that they can truly understand the data that they are collecting, because all said and done risk analytics is a complex field and requires professional assistance.
The road ahead for risk management and risk analytics
Risk management is still in its infancy stage and has a long way to go especially in the face of rising challenges and demands of various sectors. This means that various companies are evolving and this will led to the emergence of detailed data and increasingly sophisticated reports that can meet the challenges of these industries. For example, banks are required to conduct regular and comprehensive background checks on all their customers and at the same time prevent issues related to money laundering and thefts. With Big data technologies, there are multiple opportunities for analysts to help the industry address these issues in a scientific, simple and easy manner. With opportunities to address these challenges in real time, these techniques can help companies to reduce risk, improve risk coverage and provide stability to their companies as well.
In conclusion, brands that effectively leverage risk analytics will be able to manage risks in a better manner. This will help them to not just make better decisions but also get ahead of their competition in a successful manner.