The current economic instability across the world has blindsided even the most established and financially robust businesses. This stands true for organizations in Australia as well, as they struggle to operate in recovery mode and prioritize their ability to run basic operations over collecting profits.
While it’s true that money makes the world go round, experts have identified that a major cause of the financial struggle that companies are facing is due to poor investment decisions. This is especially true when we consider the lack of investment in risk management in Australia.
It is hard for companies to admit that they were ill-equipped to mitigate unforeseen risks, but that doesn’t take away from its reality. Companies in Australia are now scrambling to minimize their financial losses and trying their best to keep the organization afloat.
They are working on implementing emergency risk tolerance and mitigation strategies in hopes of surviving the disasters being sent their way amidst the current global economy.
In such circumstances, one can’t help but wonder just how differently things could have gone had these companies invested in risk management training for their employees. Today, let’s go over everything you should know about risk management and determine all the reasons why companies should be making these training protocols an essential part of their staff programs.
What is ‘Risk’?
Before we try to decipher the importance of risk management training, it is important to first understand exactly what risk is and why it is such an essential component of any business.
In the past 20 years or so, many different pieces of Australian legislation have attempted to solidify and define what risk is. In most cases, the risk is associated with a harmful event or a situation that causes damage to your organization.
However, almost two decades ago, a joint committee created by Standards Australia and Standards New Zealand determined that the true standard of risk assessment and management should be done not only in terms of something that might occur but also the damage or impact it would have on a company’s objectives.
Risk isn’t just confined to harmful events; its consequences should be considered in both positive and negative attributes to fully decipher what risk is and how it can be managed well. So, the true definition of risk is just the chance of something happening that will have an impact on objectives.‘
How Can Risk Be Characterized
Now that you understand what risk is, it is also important to characterize it. Risk can be characterized in two formats:
- Based on what could happen
- Based on the likelihood of its consequences
Risk management experts emphasize the importance of understanding that risk can easily arise as a result of slowly changing situations. There is a high possibility of risk developing through chronic conditions like climate change and inflation. It doesn’t always occur due to a sudden change or event.
So, one simple way of characterizing risk is by describing the potential impact or consequences that it could lead to. These consequences would describe risk in the form of loss and harm.
On the other hand, risk can also be measured by looking at the likelihood of its consequences. Likelihood and consequences can actually be connected to define the true level of risk that could affect your organization.
Importance of Risk Management Training for Your Business
As discussed above, risk management is an essential approach that allows your business to greatly improve the way it runs its projects and programs from start to finish. It is an effective means of creating new communication channels and improving your operations strategies.
Additionally, risk management training also encourages your team to set realistic business goals and schedules for each project, ensuring long-term success for your company.
Risk management also allows you to improve the overall skill set of your team, which in turn offers your company a tremendously capable staff. Here are some points that will further prove to you the importance of risk management training in Australia.
1.Increase Risk Management Maturity
The more aware your team is about all the possibilities of risk surrounding your business, the higher your company’s risk management maturity will be. Risk management maturity basically determines your organization’s ability to recognize the fact that certain risks are inevitable.
Instead of focusing all of your efforts on nullifying risk possibilities, risk management maturity ensures emphasis on risk management strategies as well. It helps your team handle risks better and move past them without the company bearing too much in damages.
The benefits of risk management maturity also include better governance of your organization. Since your team will have a greater awareness of potential threats at different levels, it allows you to take a holistic approach to risk management. You can ensure that your risk mitigation protocols review all processes from the ground up for optimal risk management maturity.
2.Improve Ability to Respond to Risks
Risk management often feels like a theoretical topic to employees. After all, it is one thing to understand what risk is and all the ways to assess and mitigate it. But, how exactly does one carry it out in practical life? What exactly is the way to determine the right strategies to employ in different risk situations and ensure minimal damage in the process?
It is one thing to understand risk and a completely different thing to be able to take what you have learned theoretically and apply it within your work environment. This is where risk management training displays its importance.
Risk management training offers your team the highly practical benefit of improving their ability to respond to risks. It offers your employees the knowledge and skills needed to do their jobs more effectively and minimize risk on all fronts.
Moreover, you will notice your staff understand the practical concept of risks better and develop the ability to effectively utilize various tools and techniques to manage risks regardless of their role within the company. They will be better prepared to handle risks overall and can execute mitigation strategies when risks are identified.
3.Show Commitment to Your Staff
Numerous studies have shown that the morale at work and your work culture have a significant role to play in determining employee engagement. A great way to increase employee engagement and keep your workforce highly motivated is by showing them that you’re willing to invest in their skills and abilities.
By offering risk management training to your staff, you display a commitment to helping your staff become more capable and improve their risk management skills.
Risk management training is also an excellent tool to improve your staff retention rates. Employees naturally feel more loyal to a workplace that focuses on their growth and allows them to build skills that will prove to be fruitful in the long run.
Through risk management training, you offer your employees the opportunity to develop skills that allow them to tackle complicated tasks, take on more responsibility, and carry out more challenging work.
All of this ensures that your employees feel valued and can continue to climb the corporate ladder, even without leaving your organization. Hence, it can do wonders to keep employee turnover rates at a minimal percentage.
4.Increase the Ability to Utilize Risk Management Tools
Ask your staff if they are familiar with the Monte Carlo analysis. Do they know how to create and utilize Tornado charts? These are common risk management tools used by experts to carry out mitigation strategies, but unfortunately, most risk training programs don’t cover them.
It is important to offer your staff risk management training that prepares them with information about how to use tools and techniques that are specific to your risk management needs. These ensure that your team is capable of performing more than simple risk identification.
It allows your staff to use a risk log to monitor and track their mitigation strategies, along with offering valuable insights and suggestions on how to improve your risk management strategies.
5.Protect Stakeholders and Assets with Improved ROI
Lastly, this might seem like a rather tangential benefit, but comprehensive risk management training can deepen executive support for employee skill building and improve your company’s ROI.
Whether you’re training a small group of people or the whole division, your senior managers will be required to sign off on the training program. This act of granting approval creates a deeper level of support from the executive level of your organization.
On the other hand, managers typically want to see a return on the company’s investment in training. When they notice the increased ROI and reduced damages encountered after the training program from Red Risk Management, it will instantly prove to be well worth the effort.