In order to be truly successful, business decision makers need to be able to adeptly navigate around and avoid risk whenever possible. Of course, given the increasingly complicated nature of the business world, in addition to the number of pitfalls a company can encounter, risk management may not be as straightforward as it once was.
According to an October 2009 Harvard Business Review article, part of the problem with current risk management strategies is that many businesses channel exorbitant resources toward predicting what the magazine calls "Black Swan" events – high-impact, low-probability occurrences that can have sweeping and devastating consequences on a company. The problem is that many of these events cannot really be planned for, so businesses tend to overlook other potential problem areas.
Instead, business decision makers should insulate themselves by planning for the results of devastating events, with the assumption being that they could happen at any time.
Although risk management should be led by CFOs, this knowledge should permeate through the rest of the executive team to ensure that the effects of risk are being fought on multiple fronts. Whether this is a formalized process or is done in more of a piecemeal fashion is of less consequence and it depends primarily on the preferences of a particular organization.
"Senior management doesn't think about managing risks," Casual Male Retail Group CFO Dennis Hernreich told CFO.com. "We think about managing the business, where there are risks around every corner. [Risk management] is just part and parcel of everything we do."
When engaging in risk management strategies, businesses should have an executive team that is constantly aware of potential problems and have the experience necessary to know how to control crises when necessary. To find these executives, many of whom are currently employed at other businesses, organizations can hire a retained executive search firm to lead a global executive search.