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Risk management is the process of identifying, assessing and controlling threats to an organization’s capital and earnings. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters. IT security threats and data-related risks, and the risk management strategies to alleviate them, have become a top priority for digitized companies. As a result, a risk management plan increasingly includes companies’ processes for identifying and controlling threats to its digital assets, including proprietary corporate data, a customer’s personally identifiable information (PII) and intellectual property.
Every business and organization faces the risk of unexpected, harmful events that can cost the company money or cause it to permanently close. Risk management allows organizations to attempt to prepare for the unexpected by minimizing risks and extra costs before they happen.
By implementing a risk management plan and considering the various potential risks or events before they occur, an organization can save money and protect their future. This is because a robust risk management plan will help a company establish procedures to avoid potential threats, minimize their impact should they occur and cope with the results. This ability to understand and control risk enables organizations to be more confident in their business decisions. Furthermore, strong corporate governance principles that focus specifically on risk management can help a company reach its goals.
Other important benefits of risk management include:
- Creates a safe and secure work environment for all staff and customers.
- Increases the stability of business operations while also decreasing legal liability.
- Provides protection from events that are detrimental to both the company and the environment.
- Protects all involved people and assets from potential harm.
- Helps establish the organization’s insurance needs in order to save on unnecessary premiums.
Manufacturers face a greater lineup of potential risks today than at any other time in history. More sophisticated equipment, rapid growth, and a need to gain a competitive edge mean that production and logistics have to work seamlessly. Delays that might not impact a business in another vertical can be devastating to a manufacturing brand. Depending on what is being made, for example, interruptions in continuity could damage delicate or perishable raw materials or cause late shipments that antagonize customers.
4 Types Of Enterprise Risk Impacting Manufacturing Companies
Learning more about the specific areas of risk manufacturers face will help ensure you are prepared and ready for any eventuality.
1. Technology and Cybercrime
Applications and software have become more sophisticated than ever, but the sheer number of connections and the number of IT endpoints most manufacturers have means that your organization faces a greater risk of exploitation. IT devices can boost efficiency at all stages of the manufacturing process, but they also create entry points that could potentially offer access to your network. Attention to data security and protection is a must for any manufacturer. If you accept credit cards for order payments, you may also be an appealing target for cybercriminals, as cardholder data is coveted and easily exploited.
2. Business Interruption
You can’t prevent some forms of interruption from happening, yet human error can also cause a domino effect that greatly disrupts operations. Fire, flooding or other natural disasters, and even actions by your own employees can prevent your company from conducting business as usual.
If this happens and you do not have a plan to move forward without interruption, your entire business could suffer. Even a week of downtime can be devastating for your bottom line and will take months to recuperate. You can’t prevent natural disasters and other emergencies, but you can create a plan for business continuity. With a plan in place, if the worst happens, you’ll still be able to operate effectively. A continuity plan can help mitigate your risk and minimize the impact interruption has on the organization, but only if it’s formulated before something goes wrong.
3. Third-Party Failure
Your own business is in pristine shape and running efficiently, but you could still face problems if a third party disrupts your processes. The vendors you rely on for your raw materials, services and logistics can all have a significant impact on your own ability to deliver.
Third-party vendors also affect your ability to comply with regulatory issues and even your brand reputation, so you must have a way to assess risk. Moving forward with a Third-Party Risk Assessment can help you spot signs of trouble or potential exposure that could impact your brand.
4. Compliance Risk
The way your brand prepares for compliance with important regulations and laws will impact operations and even sales revenue.
Assistance With Enterprise Risk Management
If you are not sure what risks impact your company the most or you want to be sure you have prepared for any eventuality, we can help. Contact our team to assess the level of risk in each of the above areas and beyond. We can identify potential risks, then create an ERM strategy that addresses any vulnerable points. Your company will gain robust protection and decrease the risk of interruption.