MBA Research

Trend #18: Increase in the Importance of Risk Management

Business Trend

In our ongoing conversations with the business community, we asked them to identify business trends impacting the workplace. One frequently cited trend is: increase in the importance of risk management. Risk management is an everyday issue that impacts everyone and impacts the company brand.

Workplace Implications

Businesses are increasing the resources dedicated to risk management in response to the environment in which they now operate. Political and regulatory uncertainty, harsh weather conditions, volatile markets, unexpected price changes, disruptive technologies, regulatory noncompliance, and talent shortages are some of the major risks creating business losses. Ethical breaches, data breaches, and operational failures have all been in the news over the last few years. Additionally, businesses have paid significant fines for questionable practices, quality failures, and compliance violations.

As businesses focus more on risk management, they emphasize organizational culture and leadership character and not just the technical competence of their employees. Businesses have realized that rules and policies aren’t sufficient to address the variety of risks that they must manage. Policies cannot cover every situation, and new risks are continually emerging.

Businesses need a risk management process that is dynamic, while also being predictable. They want employees to determine the right actions to take in ambiguous situations. For this reason, businesses are also investing more time in assessing candidates for fit that extends beyond skills and abilities. It also includes assessment of personality, integrity, motivation, strategic thinking, critical thinking, and problem-solving. This emphasis on risk management is also leading to a greater demand for risk assessment skills and risk-related certifications and accreditation.

Classroom Implications

Risk management should receive more emphasis across the board, especially as it relates to self-governance, ethical practice, internal controls, and global trade. Students should discuss the top risks that businesses face, trends in those risks, the implications for businesses and the strategies businesses are using in response. Ethical decision-making and its relationship to risk management should be discussed. Additionally, students should understand their personal responsibility for managing business risks and explore how they could apply risk management principles at different stages of their career.
 
Students could research recent incidents that have exposed businesses to significant negative publicity, fines, and/or litigation. They could estimate the total cost to the business, including lost customers and revenue, increased spending on marketing, and spending to improve operations to prevent further incidents. Teachers could reinforce this concept through review of publicly-traded company’s responsibility statements. Teachers could discuss supplier code of conduct, compliance programs, and other practices businesses have implemented to manage their risk.