Business Sustainability Is Determined By Risk Management: True or False?

Summary

The article has spoken about the importance of risk management in maintaining business sustainability. It has focussed on five conditions, which highlight how sustainability is determined by risk assessment and aversion.

Risk management refers to the rigorous act of detecting, evaluating, and timely controlling all the threat factors associated with the legal, financial, human resource, and security aspects of a company. Market sustainability is the long-term goal of every organisation. It requires stakeholder stability, an abundance of resources (technical, financial, and human), brand strength, quality performance, and a risk aversion protocol.

The international business management standard for risk management is ISO 31000. It offers a holistic set of policies and procedures for effectively managing threat counts. The aspect of business sustainability is vulnerable to both internal and external threats and weaknesses. If risks are not detected from time to time and management is too reluctant to take any measures, a company is likely to face financial loss and reputational damage.

A company’s longevity or the power to stand against its harsh competitors depends on its ability to avert risky situations. The article has discussed whether it is entirely true or not.

What is business sustainability?

The term refers to a company’s strategic efficiency in reducing harmful impacts occurring from timely-diagnosed adverse situations. Those situations can cause by different operational factors. The sustainability practices are generally evaluated against the social, governance, and environmental metrics. The 3 fundamental principles of business sustainability are-

● Social responsibility
● Environmental awareness and contribution
● Economic responsibility

These principles are often regarded as people, planet, purpose, and profit together. A sustainable business organisation is committed towards the welfare of the environment and community. Nowadays, consumers are more likely to buy from brands that are environment-friendly and exhibit responsible actions to promote the ethical use of natural resources. Therefore, a company’s brand longevity is partly dependent on its actions to minimise its carbon footprint. Consumer loyalty is critical to the overall success of a brand. Today’s customers prefer transparency. They go through the ingredient list and manufacturing process.

How Does Risk Management Promote Sustainability?

Risk management is the easiest way to scrutinise and detect possible flaws in operations. It is both a time and cost-saving mechanism that offers endless benefits. The entire process should be done under professional guidance, especially if ISO 31000 is being implemented.

The benefits of risk management that promote sustainability are the following-

1. Cost management

The fundamental aim of risk management is to help management avoid catastrophic events. By reducing the impact of adverse situations, a company gets the opportunity to save money for contingency purposes. By timely averting disruptive events, a company saves both time and money that could have been wasted on modifying situations after facing losses. Cost management is necessary for sustaining the competitive market. A contingency fund is essential to fight against emergencies brought by environmental, technical and economic calamities.

2. Steady market growth

Risk management is often regarded as a defensive mechanism. To enable growth, a company must have a strong strategic defence to protect the company assets from external harm. Risk management is not just a yearly analysis of the threat factors. It is a thorough detection, evaluation and mitigation of all the probable situations, which can prevent impactful growth of the company.

3. Loyal customers

To earn loyal customers, quality is one necessary factor. As mentioned before, customers are now aware of the environmental pollution caused by different organisational activities. For maintaining a brand reputation, it is necessary to understand what your customers want. Through a risk management program, a company gets the opportunity to run market research, which directly helps to identify customers’ buying preferences.

4. Competitive edge risk management

By identifying and reducing risks, the program allows the management to increase its competitive advantage. External threats from rival companies are timely identified. The authority gets a sufficient amount of time for taking measures to counter the strategic moves of its competitors.

Understandably, a risk management system has a holistic approach towards the sustainable growth of a company. The system is required to be implemented under the professional guidance of ISO consultants as they have the right amount of expertise to streamline everything.

Author’s bio

Damon Anderson is a retired ISO consultant from Canberra. He served as a certified audit specialist for more than 30 years. He invests his leisure time in researching and writing blogs and articles on different relevant topics related to industry business management standards.