6 Tips for Managing Operational Risk in a Downturn

6 Tips for Managing Operational Risk in a Downturn
Many organizations adjust their risk appetite in an economic downturn, as risk is expanded to include supplier and customer insolvency, not to mention cash-flow changes.

Many organizations have gone through unprecedented changes in the past year. While some have struggled to cope, others have proven resilient in the face of uncertainty. To handle adversity gracefully and emerge from a period of hardship in good shape requires a deep understanding of your business. To manage operational risk effectively, you must identify threats, craft incident response plans, and establish visibility.


Underpinning a successful strategy is the agility to act swiftly in the face of rapidly changing circumstances. There are various steps any organization can take to gain deeper insight into operations and establish a holistic picture of the threats that matter most. The urgency that a downturn creates can be an opportunity for positive change to build greater resilience.


Many organizations also find the need to adjust their risk appetite in a downturn as operational risk is expanded to include potential risks directly related to downturn such as insolvency of suppliers and customers, and changes to cash-flow patterns, all of which may have been based upon more predictable trading periods.


Understand Your Risk AppetiteIt's crucial to have a clear picture of the risk that your business is prepared to endure. Different businesses will have different tolerances, in terms of the downtime they can handle and what their customers will put up with. The process of identifying where the major risks lie isn't just about informing mitigation strategies, it can also be a catalyst for necessary change. A dynamic landscape and shifting external pressures can shine a light on areas that require investment, or even parts of the business that must evolve.


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