Business Risk Assessment: Certainty Amid Uncertainty
The coronavirus pandemic situation is changing rapidly and needs a close and thorough monitoring. Alongside the obvious risks to human health, COVID-19 has serious impacts on organizations that arise from the travel and opening restrictions, event cancellations, workforce issues, supply chain disruptions, financial and market volatility, and cash flow problems.
Even though we don’t know how long the COVID-19 outbreak will last, what impact on the global economy, business, and people’s everyday life it will have, the effects of the coronavirus pandemic are predictable. The impact on organizations, customers, vendors, and communities is knowable.
As action remains elusive, there is a natural tendency for panic to arise. Clear and simple business risk assessment plan turns panic into productive and proactive steps that are aimed at fighting certain risks instead of confronting uncertain what-ifs.
Coronavirus outbreak: novel cause and familiar consequences
Enterprise Risk Management (ERM) is a technique and software infrastructure that makes those impacts clear to your organization, industry, and geography. It helps compile a plan of action and provides a mechanism for communication and implementation.
A risk management framework engages all your staff to support preparation and changes to reduce negative impacts from threats. Reducing the coronavirus negative business effect is imperative. With generated actions framework and enterprise risk management strategy, fear can be transformed into action and unease into the peace of mind.
Implemented principles, tools and techniques of risk management, business continuity and crisis response that can be deployed to help organizations prepare and respond to situations as we have now.
Hopefully, organizations will have business continuity plans which will form the basis of a response, but it is quite likely that they did not foresee a situation as widespread, complex, and long-lasting as we appear to be facing. And we will also see how well theoretical plans work when faced with real-life situations.
Business continuity risk assessment: identify certain risks
Coronavirus effects are considered to be uncertain both on people and the global economy. But if we change the point of view and take a closer look at the problem, we can see that there are certain risks companies face. To identify them and to compile an effective business risk assessment plan is the first step to successfully fight the uncertainty caused by coronavirus disease.
Here are some of the key risks that organizations face as the COVID-19 crisis deepens.
- The disruption caused by social distancing. Social distancing is a term applied to certain actions that are taken by public health officials to stop or slow down the spread of a highly contagious disease. During the peak, contagion periods policies of “social distancing” are likely to be necessary everywhere from workplaces to schools. Most business events and travel will be curtailed or canceled during this peak period. How will your organization generate revenue and execute operations with workplaces mostly either offline or remote?
- The collapse of employee productivity. Every industry will be impacted, as organizations are likely to see. The essential part of the staff during this period may be unable to work due to sickness, either directly or indirectly. Even if your employees are not sick, many will be affected by the need to care for family members who are ill or need care. They may also need flexible working hours due to school and daycare closings.
- Stressed supply chains. The global economy is still highly integrated and most countries and companies rely on vendors for their business. From crude oil and pharmaceutical raw materials to clothing and most consumer-good products, there will certainly be purchasing delays. Heavy equipment and manufacturing supply chains have already been impacted by coronavirus spreading across Asia, Europe and the United States. Let’s not forget, too, that a major trade war and competition with many trading partners remains unresolved.
- Recession, unemployment, and investment pull-back. Business analysts’ forecasts indicate that the global economy will likely be in a full recession by the fourth quarter of 2020. Will consumers reduce their spending? Conferences are getting canceled. Corporations are asking people to work from home. Schools and universities are asking students not to return after Spring Break. Hospitality and travel industries are on the verge of extinction. The economic engine of growth driven by continuous investment and consumption has stalled out. Experts are uncertain whether a coronavirus vaccine will be available before the first quarter of 2021. Investments are highly negatively impacted by uncertainty and corporations will likely cut back growth investments, contributing to a rapid rise in unemployment. There may be significant layoffs at existing businesses in the “second wave” of COVID-19 that may surge again in the third quarter.
- Economic instability and civil unrest. The U.S. budget deficit is at a record high. Government spending will increase fast but that may not be effective due to lack of planning and preparedness. Great Britain has left the European Union and is likely to see dramatic changes go into effect in December 2020 which are likely to trade immigration, and a large range of other areas of international business, at the same time the second wave of COVID-19 may be hitting.
All the listed effects are seasoned with people’s fear, lack of confidence, and feeling of insecurity.
So what now? Organizations need to put in place mitigation plans to address each of these risks. By taking steps below they will be in a better position to reduce the risks that the coronavirus will have on their business.
Risk assessment in the business plan: certain steps under uncertain conditions
The mitigation activities that your business can prepare can be wide-ranging depending on your industry, geography, size, and other factors. These initiatives may include activities that range from shifting budgeting from fixed costs to variable spending to provide flexibility in times of uncertainty.
Five risk management steps that organizations should think about as they defend themselves against the coronavirus effects are listed below.
- Readiness assessments. This is something to start with when an organization doesn’t know what a business continuity program should consist of. Industry and role readiness templates, as well as pandemic-specific templates, allow a company to evaluate its business continuity program against a best practice standard and identify where gaps may exist. These readiness libraries transform standards and best practices into actionable pieces so that organization authorities can track progress and adherence.
- Risk management plan. All organizations should complete a risk assessment on their core business processes to identify and prioritize any new risks or gaps in their existing controls for new scenarios like pandemics, recession, and geopolitical conditions risks. When prompted with risks, top managers on the front line are in the best position to be able to assess how these scenarios will impact their areas of responsibility.
- Business impact analysis. Not all risks within processes or functions within an organization should be treated the same way. A business impact analysis allows organizations to identify the most critical parts of the business to operate. The results are used to determine which parts of the organization to prioritize during a business continuity plan event to maintain operations.
- Policy management. As the pandemic is spreading, new information arises. Existing policies will need to be revisited, updated and communicated. For instance, reviewing and revising a work-from-home policy is effective only if the distribution of that revised policy is made with proper tracking for adoption across the staff members.
- Incident management. Incident management is typically a highly fragmented activity included in a process.
In times of change, a unified enterprise-wide management mechanism is needed as an input to evaluate the effectiveness of mitigation and policy activities. It is necessary to provide all employees a way to escalate issues and concerns that can be turned into a FAQ published back out to all employees.
This gives workers confidence in their job safety and provides managers at the appropriate level a holistic view of what is happening in their teams, departments, and organization.
Is the only way to respond to coronavirus effects to wait for guidance from local, state or federal authorities or when quarantine is suddenly implemented?
The preparation process is to start at once through risk management to uncover many policies and processes throughout various business departments. A thorough and balanced business risk assessment is recognized as a key success factor under current conditions.