Corporate Risk Management: Inherent Risk

Corporate Risk Management: Inherent Risk

In today's business world, no significantly sized company operates without a system or systems of some sort.

The larger the company, and the more employees, the more complicated these systems tend to be. Ever since the industrial revolution, systems entailed the affiliation of human resources with mechanical and later electronic equipment in order to ensure the smooth operation of the business. It is however also true that both humanity and machinery are flawed, although in highly diversified ways. Assessing such flaws is the key in managing inherent risks posed by systems.

Human beings are flawed in a vast variety of ways. Worker experience, energy levels, stress levels, and personality, to name a few may for example influence his or her effectiveness in working with particular machines and electronic equipment. Workers who are for example inexperienced with certain computer programs may be detrimental to a company's accounting department, while being better suited to the creative department, and so on.

In order to mitigate systems risks in terms of human resources, the risk manager should therefore make a thorough assessment of the human factors necessary for the optimal functioning of systems in the company. It should for example be ensured that all personnel are fully trained in handling the equipment they are expected to use during their typical workday. Factors of ergonomics are also important here. Issues such as eye strain and computer fatigue should be taken into account when workers spend an extended part of their workday in front of the computer screen. To minimize mistakes as a result of computer-related fatigue or strain, workers should be encouraged to take regular breaks and walk around in the workplace. Furthermore, such workers could be offered a variety of different activities to minimize the hazards inherent in spending a large amount of time sitting in front of the screen.

Stress factors are another human factor that should be taken seriously in mitigating systems risks. When new employees are appointed, for example, they should be observed thoroughly during the first months of work in order to assess their stability and stress levels. A reporting system could also be implemented, by which workers are encouraged to consult management regarding their own or a co-worker's stress levels and concomitant work performance. It is important to ensure that none of these measures be perceived as unfair.

In terms of mechanics and electronics, it is highly likely that any machine, computer, or other device is likely to fail some time during its lifetime. It is also highly likely that this will occur during the operation of such a machine. Depending upon the nature and importance of the machine in question, injury may result for the employee operating the machine, or the company may collectively suffer loss or damages in terms of elements such as lost data.

One important way of mitigating machine breakage risks is via regular updates, maintenance, monitoring, repairs and the regular purchase of new programs and machines. While this cannot guarantee that machines will never break, it can significantly reduce the risks associated with such breakage. Regular monitoring for example will result in more accuracy in terms of predicting breakage and taking precautionary measures before this occurs.