Each organisation should categorise the risks it faces. This is crucial to the anticipation phase of operational resilience.
What does that mean for an organisation?
A risk can be defined as an event or series of events that may happen to an organisation. There is always a chance that they will not happen!
Each of these is assigned a probability between zero - non occurrence and 1 definite occurrence ,of both the chance if it happening and its potential impact on the organisation itself and upon wider society.
Both these probabilities multiplied together give a combined probability score that feeds into the organisation 's risk register.
Is important to get both of these initial probabilities correct because results could be misleading.
For example if we deemed the probability of a pandemic occurring as 0.3 but the probability of its impact as 0.9 then its total probability score would be 0.27. Such a score would be low but would be driven by the initial suggestion that the probability of a pandemic occurring would be low.
We must be very careful and realistic about assigning such probabilities!
Let's examine the main risk categories for non-financial
Organisations:
Business Risk- Demand,supply,price and competition.
Operational Risk - Need to replace existing product and service delivery processes
Market Risk- changes in inflation, interest rates and exchange rates.
Credit Risk -the credit rating of the organisation, its partners and suppliers
Reputation Risk- the ability of an organisation and its partners and suppliers to deliver goods and services as promised to third parties.
All these 5 categories capture risk categories that a non financial organisation must address.
We are not concerned with the risks themselves, only the categories they fall into.
We will examine specific risks in a separate blog.
This categorisation of risks is a critical factor of the anticipation stage of determining organisational resilience of an organisation.
The foothills of organisational resilience need to be addressed here and an organisation can diversify its activities to mitigate against risk, providing that the risk is narrow and defined. If the risk to an organisation is not narrow and defined but all pervasive then an organisation cannot successfully diversify its activities to mitigate risk.
In summstion, organisational resilience is always a journey with no end!
One can be more resilient than one was in previous years and better prepared but one can never be totally resilient.
The message here is we are on a constant journey of constant improvement in our quest to achieve operational resilience.
Business zRisk-
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