Why Risk Management Practices Need to Evolve in 2023 and How to Do It

Even though we are only starting the year, 2023 is looking like it could be shaping up to be a precarious year. We are in the midst of an economic downturn and the number of volatile climate events is increasing. We’re vulnerable to any disruptions that could happen anytime throughout the year. If there’s any group of people that understand that we need to be more than prepared, it is the risk professionals out there.  

Risk professionals have a reputation for being creatures of habit — the people who would rather do things the way it’s always been done. If the techniques that have been used to manage risks for the last 50 years have been sound, then why change them now, right? Unfortunately, the days of sticking to traditions are long gone for risk managers. The main components of risk management have remained unchanged, but the environment risk professionals operate in is vastly different.  

More and more forward-thinking risk professionals are realizing the need to keep evolving with trends and changes in the industry. If not, their organizations can face dire consequences, and they might seem inadequate as a risk professional themselves.  

Integrating technology into risk management 

One of the biggest — if not, the biggest — changes in the risk industry is the proliferation of technology available to help risk professionals do their job. Digital innovation and mobile technologies are revolutionizing how risk managers can capture, organize, analyze, and report on their organizations’ risk management program data. For example, the LineSlip platform lets risk professionals spend less time sifting through documents and more time where it counts – understanding exposures and mitigating them. 

It may be scary to adopt new technology but refusing to use new technology could be detrimental, with efficiency and accuracy being a cost. Risk professionals need to be open to exploring new technology and finding ways to integrate it into their company’s risk management processes. The symbiotic relationship between new technologies and risk management practices could yield great results in the long run.  

Speeding up risk management

Technological innovations have accelerated the pace of business, which in turn has increased expectations for the speed of response. Risk professionals must move faster at their jobs if they’re going to make a difference for their organizations. Risk managers cannot outrun risk, but they can speed up the fundamentals with the right tools. 

An important starting point for accelerating risk management is to capture and organize risk data so that it’s accessible instantly – not dispersed throughout the organization’s operations or, even worse, only existing in paper form. 

One risk professional whose employer was struggling to contain workers compensation losses realized that his department could not effectively prevent injuries if the employer’s safety practices and protocols remained in static binders. He implemented a digital repository and made sure workers were reminded to follow them. In addition, his department imposed a chargeback system that gave financial incentives to business unit leaders with good loss experience. Over time, this approach – more carrot than stick – cultivated a safer culture, and naturally workers comp losses decreased. Because business units incurred lower claim costs and kept workers productive, the employer could focus on growth and profitability. 

Imagine the impact risk managers can have if they approach every exposure that way with effective tools – keeping risk data at their fingertips, sharing risk mitigation strategies, and involving colleagues in seeing the impact of risks on their business. That’s what is called creating a sustainable competitive advantage while making the risk management function even more valuable. 

Continually updating risk management knowledge 

Having the experience to mitigate risks and mitigate disruptive events is valuable. However, it’s critical for risk professionals to not depend solely on their experiences. There is greater access to information now. Risk professionals need to constantly keep up-to-date with industry trends via credible industry publications. Risk managers may even consider obtaining professional certifications to sharpen their toolbox.  

Next step in risk evolution

“That’s the way we’ve always done it” is possibly the worst answer to “Why do we do things that way?” Values and principles are foundational and can influence decisions, even when risk professionals are using tools and technologies they never have before.  

The next step in the evolution of risk professionals is to adopt the tools and processes that optimize good risk management practices. Business operations will keep getting faster, so risk managers need to move as fast as their organizations are, or they will get left behind. With the right technology solutions, risk managers can adapt and thrive.