ARTICLE | April 19, 2023

Conducting a comprehensive risk assessment is just the beginning of digital risk transformation. By using assessment results to reduce risks in a meaningful way, companies are also likely to find new ways to improve operations, enhance information protection, ensure better regulatory compliance, and generally improve governance, risk, and compliance (GRC) capabilities. However, these benefits don’t appear magically. Executives must use risk assessments to guide improvements and create a competitive advantage.

The following checklist can help:

1. Recognize the importance of risk assessment to business success.

Risk assessments are important tools for identifying and acting on immediate and significant risks. However, they can also generate compelling insights into company operations, including strengths, weaknesses, and potential opportunities for growth and improvement, such as improved internal process efficiency.

2. Make the business case.

Your company can use risk assessments to build a business case for changes. Rather than centering on narrowly focused risks at the department level, for example, risk assessments can become the basis for organization-wide changes and improvements that can advance a range of strategic goals. For example, many private equity firms conduct comprehensive risk assessments on all target companies to make sure those companies have adequate risk and internal controls management in place before closing; those results can also identify value-creation opportunities within the organization.

3. Act on what you find.

Risk assessments offer a wealth of insights that can identify targeted action at the company, division, and department levels. This can include the establishment of virtual CISO and eGRC programs, modernizing and re-engineering risk management activity at the department level, and more efficient spending on the most pressing and strategic areas of risk across the business. For example, instead of layering on new controls, changing a business process could reduce risk and improve controls without adding expense and disruption.

4. Support digital transformation.

Most large and middle market organizations are making significant investments in digital transformation. Evaluating risks and enhancing risk management activity as part of an interdisciplinary approach to risk transformation is an important part of that process. This can include gauging the relevance of each risk to the business and identifying remediation needs and capabilities in areas like security, data protection, regulatory compliance, and other important functions.

5. Build a lasting risk framework.

Risk assessments create a detailed picture of your organization’s risks at one moment in time. By building a risk framework, your company can address those risks now while also helping to ensure risk management and controls respond to new and emerging risks over time. Such a framework supports an ongoing and holistic view of risk, leading to appropriate risk mitigation and control activities throughout your organization.

The takeaway

To realize the competitive advantage of improved risk management and controls, leaders must go beyond a typical risk assessment, identifying ways to leverage the value of the assessment and its findings. This is the first step to ensuring that a risk assessment is not a “one-and-done” exercise but a strategic investment in your business.

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