Risk Challenges and Integration Paper 3

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Risk Challenges and Integration

Saunte Allen

Liberty University

BMAL 714: Risk Management Process and Practice

Professor: Dr. Clifton Thacker

May 6, 2022

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Abstract

Risk management is an integral part of the success of any type of business. Unfortunately, many

companies from all industries disregarded creating a risk management plan, and that decision

would result in their demise. Instead, those companies only relied on knowledge, skills, and

design their business strategies around industry risks such as environmental, technology, and

security. As companies started to grow, their risk management plans also needed to expand to

fend off new threats born out of innovation. This paper tends to broaden the overall

understanding of strategic leadership by designing a risk management plan that would

incorporate different risk management techniques, understanding the risk that people have on an

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Risk Challenges and Integration

There are many components that must be in sync to have a successful risk management

plan. Abkowitz and Camp (2017) suggest risk is inherent at all levels of an organization;

therefore, risk management is a necessity. One of the first decisions management must

critical factors are the industry in which the company exists and the company's structure. Still,

arguably the most impactful component will be the leadership charged with implementing and

monitoring the plan.

Management will encounter different challenges when integrating a risk management

plan. Business leaders soon discover that implementing a risk management plan will have

People are essential to an effective risk management plan, but people are risks too; therefore,

ethical leaders must build, monitor, and evaluate processes such as ERM for effectiveness.

Enterprise Risk Management

Risk management is not a new discipline; it has been around since the beginning of time.

America's history has many stories of great leaders’ conquests and the risks they encountered

while achieving those ambitions. Today, there are various forms of risk management because

businesses now understand its importance. According to Abkowitz and Camp (2017), it is

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dangerous for an organization to not look for ways to identify and address potential hazards that

could incur significant consequences.

Risk management tools can be used in any business industry. Although the phenomenon

began in the insurance and financial markets (Callahan & Soileau, 2017), other industries soon

define, develop, and implement the right risk management plan that best suits the company's

needs. Whichever type of risk management tool is chosen, the goal remains the same; reduce

threats while allocating resources to potential opportunities (Callahan & Soileau, 2017).

Enterprise Risk Management (ERM) checks all the boxes for most companies looking for

a systematic process that enables an organization to consider threats to its ability to meet

have several steps. Although the steps may have different titles, the objective remains to increase

the probability of meeting organizational goals within an acceptable level of risk (Marling et al.,

2019). The ERM process consists of identification, assessment, control, and monitoring. In

addition, other responsibilities such as communication can be considered a step but are

conducted throughout the entire process. According to Marling et al. (2019), effective

communications during ERM will significantly impact the outcome of every step because there

are lessons learned and feedback that will be beneficial for the success of the next step.

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Marling et al. (2019) describe risk identification as the most critical component of the

ERM process because it examines an organization's activity or event to identify opportunities

and threats that may occur. Risk assessment is an analysis conducted by assessors to determine

the likelihood and consequences of the threat (Marling et al., 2019). The next step in the process

Marling et al. (2019), at this point, risk-takers decide to accept the risk or look for opportunities.

The final stage is monitoring, where supervisors observe planned controls to ensure controls are

working as designed (Marling et al., 2019). The process is continuous and should be reevaluated

every time used to ensure it is still adequate to minimize or eliminate the risk.

Risk Management Leadership

Today, all major automakers are making EVs, with some companies like GM planning to

go full electric. Conversely, Blockbuster was the king of movie rentals in the 1980s (Chopra &

Veeraiyan, 2017) but did not survive the internet emergence because of poor leadership.

Effective leadership is agile and adaptive to change when change, but change can be a challenge.

Strategic Leadership to Implement ERM

Research suggests employees who are resistant to change are frightened by the unknown

and uncertainty surrounding the change (Belschak et al., 2019). When leaders communicate

comprehendible reasons for change, employees are more accepting and are more willing to

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support change efforts (Belschak et al., 2019). Supporting the new business strategy shift that

comes along with installing the ERM process will take effective leadership to implement and

execute. Still, it will require the entire organization to be successful. According to Belschak et al.

(2019), change readiness can be measured by how soon workers accept and adapt to changes.

2019). Change requires strategic leaders to prepare organizations to transition to a new business

strategy that includes risk management. Risk management is at the core of strategic management

(Iraci, 2019); therefore, organizations rely on leadership to plan, organize, and execute the ERM

process. Furthermore, the implementation of ERM intensifies organizational anxiety that comes

from being in a turbulent environment. Jaleha and Machuki (2018) suggest strategic leadership is

sense of purpose and direction while also exhibiting behaviors for others to emulate (Jones et al.,

2018). The influence of behavior by leaders decreases the anxiety that comes with change, and

implementing ERM is an alteration in business that could be met with resistance by some

workers.

Cregard (2017) postulates spiritual leadership differs from traditional leadership because

its focus is not solely on production and productivity. Instead, spiritual leaders integrate mind,

body, and spirit to focus on people and their well-being (Cregård, 2017). Spirituality is an

interconnectedness that is a resource that an individual can tap into for strength (Anderson &

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Burchell, 2019). Spiritual leaders are champions of ethics with followers that observe,

internalize, and mimic the ethical behaviors of these leaders (Eva et al., 2019).

Although ethical leaders raise workers' moral standards and mindset (Eva et al., 2019),

there are still risks associated with spiritual leaders. According to Cregard (2017), spirituality is a

(Anderson & Burchell, 2019); those relationships could intertwine people's professional lives

with their personal lives (Cregard, 2017).

People and Risk Management

People are the most important resource for any company. People are behind the successes

and failures of an organization; consequently, business leaders must be skilled in managing

Where there is a risk, there is also an opportunity. Wright (2017) suggests that both risk

and opportunity have some level of uncertainty, but an opportunity is an action that could have a

positive impact or financial gain for the firm. Although there are several areas where people and

risks are an issue, decision-making is possibly the most critical one in business. Managers decide

the risk appetite and tolerance for a given situation. The acceptable risk level cannot be a

guessing game when configuring the company's risk tolerance. The risk appetite must be aligned

with the organization's people, business strategy, and other processes (Wright, 2017).

Types of People Risks

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An association can be made between people and risk in every aspect of life. In business,

there are a few critical areas where people significantly impact risk awareness. Creativity and

innovation are the foundation of creating a competitive advantage but are considered risk-worthy

opportunities. Competition drive companies to seek new ways to make the company profitable.

downside. Creativity is risky because it gives power, responsibility, and control (Zhang et al.,

2018) to individuals without leadership experience.

According to Nechaev et al. (2017), innovation always involves risk because its impact

cannot be accurately calculated in advance. In addition, innovation produces risk because it is a

doorway to security risks, especially cybersecurity. Cybersecurity and computer hacking are

organizations have access to information, which, if breached, could cause severe issues for the

company or the security of the society. For instance, companies like Lockheed Martin and

General Dynamics have contracts with the U.S. government to build weapon systems for the

U.S. Armed Forces. Therefore, people and risk management are essential in preventing

innovation risks.

Risk Management Plan

According to Wysokińśka-Senkus & Górna (2021), to effectively manage risk, an

organization should design a risk process that goes through several evolutions of testing before

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being used on an activity. The initial challenge is defending against threats, but developing a risk

management plan is also challenging. For example, the Navy conducts several life-threatening

evolutions daily. One of those operations is getting a ship underway from port. Although

procedurally, this operation can have similarities from one ship to another, the sailor’s

management plan.

Risk experts would conduct several tests to reach a consensus that would refine the risk

management process (Marling et al., 2019). Since the Navy does not have risk experts, the

command would assemble a team of ship experts with vast experience conducting similar navy

evolutions to design procedures and processes. The team will define the risk management

experienced with Navy ships. Additionally, the personnel supporting on the pier would be

English-speaking line handlers who understand commands. Before deployment, every ship sends

out a questionnaire to identify personnel who speak foreign languages. Subsequently, the ship

can use those sailors as translators when in a foreign port. Finally, the team would gather all the

risks and opportunities before moving on to the next step.

Risk Assessment

The next step would be risk assessment, where the team would do two things; determine

the effect of each risk and estimate levels of risk against known information about the operation