There is a famous quote often attributed to Warren Buffett – “Only when the tide goes out do you discover who has been swimming naked”. This piece of wisdom truly applies to risk management. Most companies can survive just fine as long as the economy and the environment are operating at optimum levels. We only find out about the companies which leverage too much or take too many risks when there is a financial crisis. The 2008 financial crisis was one such event; many businesses that had taken too many risks suddenly found out that the tide had rolled back, and they had no protection whatsoever. The current pandemic is another similar situation that has exposed many organizations’ biggest vulnerabilities.

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Many organizations realized that their risk management frameworks were not up to par. It is easy to see why most static risk management frameworks failed to deliver results during 2020. Under normal circumstances, the risks that businesses need to mitigate do not change very often. While static risk management frameworks struggle a bit under normal conditions, the performance is still considered acceptable by most businesses. The pandemic was a completely different ball game that showed businesses all the disadvantages of relying on outdated technology to manage risks.

The Dynamic Nature of the Pandemic

One of the most important things that every risk manager needs to understand is that the pandemic is not a singular risk that needs to be managed. The pandemic is actually a major global event that has brought forward many new risks and challenges that need to be tightly managed. This is also why static risk frameworks are having such a hard time keeping up with the new risks that emerge and evolve in the pandemic.

What has made the pandemic so difficult to manage for many businesses is the fact that it keeps evolving and changing with time. These changes were not only coming from the virus itself but also from the response by the local and federal government. Different states had varying levels of infection and very different responses from the governments. Some states had full lockdowns going on while others simply asked people to follow SOPs but did not enforce anything in the beginning. As more data came in, many states changed their approach and implemented new rules and policies that had to be followed for any business that wanted to continue operating under the pandemic.

Cloud risk solutions reduces implementation costs along with management costs and also significantly reduces the time period required to implement such a solution. Click To Tweet

This meant that businesses had to continuously monitor the latest rules and regulations along with the latest data about the pandemic to make sure that they could correct their own approach towards the pandemic. This in turn meant that the risks that are business was mitigating or managing were continuously changing, sometimes as quickly as in a matter of weeks. Any business that still had a static risk management system which could take months to detect and assess emerging risks and found themselves without the tools needed to efficiently manage their risks affecting their business.

The Advantages of a Digital Risk Management Framework

Businesses with agile risk management technology had a very different experience managing risks within the pandemic compared to the businesses that were still managing things utilizing a static risk management framework. Risk management technology helped them instantly assess risks, predict emerging risks based on data trends, and provide risk metrics in real time. This meant that instead of having to put in a lot of effort to simply understand the risks that were affecting the business, these businesses instead spent most of their time ensuring that all the risks detected by their risk management framework we’re being mitigated as quickly and efficiently as possible.

Shifting from a Static to a Dynamic Framework

The good news for any business is that if it’s using a static risk management framework, it is much easier now to shift at dynamic framework. The emergence of cloud solutions means that instead of having to invest hundreds of thousands of dollars and 12 or more months on implementing a risk management solution, businesses can instead quickly implement a cloud-based, out-of-the-box, purpose built risk management solution. Cloud solutions need no local hardware or resources to run and can instead operate on the cloud. This reduces implementation costs along with management costs and also significantly reduces the time period required to implement such a solution.

Enterprise Risk Management Software

Some of the cloud solutions available in the market can be delivered within a matter of days. This means that any business that is currently struggling with its risk mitigating framework can potentially transform the whole framework within weeks versus months or years and quickly begin getting the type of risk intelligence and metrics they need.

Interested in seeing how such a solution can help your business? Get in touch with our risk experts. You can also sign up for our upcoming webinar titled Risk Management Challenges and Opportunities: 2021 Outlook on Tuesday, February 16, 2021 at 01:00 PM CST.