Framework for dynamic risk management in responsive organisations

Abstract

In a fast-moving business environment open to global competition and with the proliferation of new technology, risk management is fundamental to doing business, especially considering the dynamic nature of the environment in which organisations now exist. Organisations are subject to constant change and therefore require the capabilities to quickly and successfully respond to aggressive competitors and navigate volatile markets. Risk management as a tool that supports organisations in their decision making is fundamental to the delivery of value-adding products, solutions and services through effective identification, assessment, monitoring and reporting of risks that may affect an organisation’s ability to meet both their strategic and business objectives. The challenge faced by the risk management function operating in a dynamic and rapidly changing organisational environment is the capability to continuously innovate, evolve and transform its risk management processes to meet the needs of the organisation. Strong dynamic capabilities such as sensing, seizing, manage and transform are therefore required to foster agility and resilience within the risk management practices, supported by a foundation of risk management principles that promote business facilitation. In today’s dynamic organisational environment, to prevent or reduce the likelihood of undesirable events from occurring or to decrease the severity of the consequences should an event occur, a dynamic risk management framework and principles should ideally be established. A dynamic risk management framework and principles enables an organisation to continuously sense and respond to risks (opportunity and threats), continuously transforming the risk management function to meet the dynamic risk management nature of the organisation. In this research a dynamic risk management framework has been developed considering the agility attributes (responsiveness, speed, potential and flexibility) as well as the dynamic capabilities (sense, seize, manage and transform). Dynamic risk management principles (integrate, internal and external context, business facilitation and inclusive) as the foundation of the framework have been defined; having a fundamental impact on the establishment of a dynamic risk management framework and processes within an organisation. The dynamic risk management framework developed enables an organisation to map the risk management processes (identify, assess, evaluate, monitor and report) to the organisation’s dynamic capabilities and agility attributes that may assist in conducting dynamic risk management. The framework also assists in identifying characteristics of dynamic capabilities and factors influencing agility in the risk management process applied. Lastly, the dynamic risk management framework can be used to assess organisation’s maturity in conducting dynamic risk management and understand the organisation’s risk identification and mitigation capabilities by considering both dynamic capabilities and agility attributes.