12 Key Factors to Create a Risk Awareness Culture
Managing Risk = Cash Flow
Typical returns are 4:1 ROI and significant cash flow improvement
Risk is anything that impacts cash flow. Successful companies manage risk more effectively than competitors. By practicing a “risk awareness” culture that engages every level of the business in prevention-centric behavior, cash flow is improved.
Key Risk Management Facts:
Companies spend between 7 – 10% of revenue on risk related costs, including:
– Safety – Security – Information Security – Health & Wellness
– Absence* – Theft – Fraud Prevention – Revenue Inefficiency
– Audit – Compliance – Investigations – Settlements
– Claims – Insurance – Crisis Management – Emergency Response
* Incidental absence can increase the costs of employee health and wellness programs by 2X.
- Risk costs are incurred in multiple corporate silos hiding the “Total Cost of Risk.”
- In 2011, companies that manage risks effectively will receive the best insurance prices and maximize the option to self-insure.
- Private companies seem to have weathered the current economic storm because of personal wealth protection – risk tolerance is lower sustaining overall quality performance.
- Enterprise-wide Risk Management is a complete vision of company risk. A strong risk management culture helps a company respond well to unforeseeable events.
- Companies that expect top management to take risks wisely are faring much better.
- Uncertainty and financial pressure renews the need to manage risk. These pressures have always been present, but the magnitude is currently greater.
- 70% of company information system risks come from employees and trusted vendors.
- Third party vendor transactions often result in 10% or greater errors and inaccurate billing.
- Sarbanes-Oxley tests transactional controls – operational controls are “the source” of risk.
- Competitive performance is improved through regular operational reviews, which can improve revenue efficiency by up to 20% of revenue.
- Documented and tested Business Interruption/Scenario Plans sustain key operations during an emergency and improve Company survival by 70%.
- Synergy from a holistic focus on risk reduction, cost/revenue efficiency, operational loss reduction, under-performing 3rd party vendors and fraud often produce one of the most impactful cash flow opportunities available.
Risk Awareness means Managing Your Risks Well!
Deploy the Five Smart People in a Room™ technique. The five C-Suite officers who report to the CEO form the Risk Executive Council and work through Integrated Risk Management Solutions facilitation to:
1. Formally determine the material risks to the organization,
2. Confirm and align prevention-centric programs designed to mitigate risks,
3. Identify gaps between needs and actual,
4. Prioritize action plans and expectations, and
5. Report the risk assessment to the CEO and Board; with quarterly updates
The outcome is a Risk Awareness Culture; an executive team that recognizes risk as a key component of operationsand undertakes actions to understand and manage it as any other business imperative. The result is reduced cost of risk (including insurance) and discovery of new revenue opportunities. Cash flow and distinctive performance is the result.
Jim Blair is the President of Integrated Risk Management Solutions, LLC, (IRMS) a consulting practice that provides risk assessment and planning services world-wide, with a unique capability to assist businesses in developing an enterprise-wide and earnings based approach to Risk Management, and industry leading cyber-risk and information security systems.
Jim is a recognized Risk Management leader and Global Chief Compliance/Risk Officer delivering more than $200 Million in corporate gains at three Fortune 500 companies. Through specialized analytics, governance and prevention practices, he focuses corporate leadership on reducing losses, improving corporate cultures, and proactively managing enterprise risks. He specializes in governance structure and policy that transcends company organizations utilizing refined diplomacy skills, establishing a “prevention-centric” business focus and deploying long-term planning/strategy assessments and change management.
Jim has extensive experience in the communications and customer relationships management industries where he has held executive positions in operations, marketing, finance, regulatory, public policy, strategic planning, corporate governance, risk management and legal in the Pacific Northwest Bell, Bell TriCo Services, U S WEST, Inc., MediaOne Group, AT&T Broadband companies and TeleTech Holdings International.
Jim served as a delegate of the United States industry group to the G-8 international assembly on Cyber-Terrorism, served as President of the entertainment industry’s Broadband and Internet Services Theft Task Force and led AT&T Broadband’s representation on the Cable Laboratories Network Security Architecture Advisory Council and the National Cable and Telecommunications Association Committee on Cable Service Theft.
He is a key leader and Trustee of the Denver Area and National Council – Boy Scouts of America, and was recognized as a Distinguished Eagle Scout in 2009. Jim also serves as an advisor to the Rocky Mountain Children’s Law Center Board of Directors and is a member of the United Way Bridging the Gap Board. He has been recognized by Colorado’s Governor and State Legislature for his commitment to youth. He and his wife Adoree have been Foster parents for more than 20 years serving more than 70 of Colorado’s children in need.