The Current Risk Landscape
In a world where the unthinkable has become reality, organizations must rethink their risk management strategies to adapt to scenarios of high uncertainty.
COVID-19 is a clear example of a disruptive event capable of impacting organizations, and it gives us reason to reflect on "Risk Management."
On March 11, 2020, the Director-General of the World Health Organization (WHO) informed the world that COVID-19 had been declared a pandemic, since by that point there were already more than 118,000 cases in 114 countries, and 4,291 people had lost their lives. Today, May 18, 2020, the global case count has reached 4,769,000.
Alarming figures:
- 4.7 million confirmed cases worldwide
- Deaths reported in more than 100 countries
- Economies paralyzed across 5 continents
The last time a pandemic had been declared was on June 11, 2009, with the H1N1 flu, which lasted one year and two months and left behind valuable lessons on how to respond; however, its consequences cannot be compared to the current situation.
A study by the World Economic Forum (link) shows that the H1N1 pandemic was not considered a strategic risk by organizations.
This pandemic has collapsed, continues to collapse, and will keep collapsing the global economy, severely impacting organizations across the planet. Mass quarantines, mandatory full or partial business closures, the suspension of in-person education, and the collapse of healthcare systems have changed the way we live and interact with one another.
Critical questions for organizations:
- Why are pandemics not considered a risk factor by most organizations?
- Under what conditions will we need to return to our workplaces?
- Do we have the resources and the right methodology to survive in this new context?
What is very clear is that this pandemic is a disruptive event: the world will not be entirely the same, and Top Management of Quality Management Systems (QMS) will need to transform uncertainty into measurable risk assessments backed by proactive management and constant monitoring.
Fundamental principle
A risk that is not identified is a risk that is not measured, and therefore not controlled.
But what is a risk? The ISO 31000:2018 standard defines it as follows:
Risk = Effect of uncertainty
Types of organizational risk:
Internal risks
Easier to identify and control within the organization
External risks
Require constant analysis of the changing environment
Once risks have been identified, they need to be classified by priority, which requires evaluating both the likelihood of occurrence and the potential impact. Potential impact should be assessed not only in financial or quality terms, but broadly, in relation to achieving objectives and remaining viable in the market.
The ISO 31000:2018 standard defines likelihood and impact as follows:
Likelihood: The chance of something happening
Impact: The outcome of an event affecting objectives
It's worth noting that risks and objectives are always related. Top management sets objectives, and to achieve them effectively we need to determine and manage the risks that could prevent us from reaching them. An organization's risk management process should provide important strategic information about long-term risks. The ISO 31000:2018 standard defines risk management as follows:
Risk management = Coordinated activities to direct and control an organization with regard to risk
Opportunity in crisis
Risks don't always involve negative considerations. Crises give us the opportunity to step outside our comfort zone and identify new opportunities that were there all along, but that comfort had kept us from seeing.
Today (May 18, 2020), Mexico's federal authority presented its "Plan for Returning to Work under COVID-19," which comprises a sequence of 7 actions that workplaces must implement to resume operations while reducing the risk of contagion and the effects the epidemic could cause:
Return-to-work plan (Mexico):
- Planning
- Define health promotion measures
- Select health protection measures
- Information and training
- Temporary policies
- Advisory support and guidance
- Complete the health-safety self-assessment document on the platforms
These measures were presented in a rather ambiguous way, so it will be up to organizations to implement them as best they can.
This pandemic, and the context it leaves behind, represents a unique opportunity to find new methods and ways of carrying out our work and activities, and to find new clients, products, or services.
Ready to put this into practice?
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