Risks of a lack of risk awareness – a varied palette.

Risk awareness is human. It’s in the subconscious. However, in the workplace, it suddenly seems to be the responsibility of the CRO. That is not the case. It’s everyone’s business. The one unique risk of a lack of risk awareness does not exist. There is a wide range of risks. To find out, I first must dissect the question. The question is multiple: what is a lack of risk awareness, and what risks does this lack entail? But then there is also a question: what is risk awareness? Risk awareness is finding the balance between taking risk and managing risk. A healthy level of risk awareness can help make informed decisions. To this end, it must minimize unnecessary risks, while at the same time exploiting the opportunities for growth.Author: Manu Steens   In this post I write my own opinion, not that of any organization.    

What is the risk of too little risk awareness?

In general, risk awareness helps on a personal and business level. Too little of it leads to problems and risks according to the risk-typology such as financial losses, health risks, safety risks, security risks, legal problems, and regulatory breaches, but also missed opportunities and personal problems.

What are examples of risks of a lack of risk awareness?

I give several risks here in response to the question of risks of a lack of risk awareness.

  1. Financial losses: This can range from poor investment decisions to lack of protection against business risks such as market volatility, competition, changing economic conditions or natural disasters. Risk awareness is essential here for making informed investment and financial decisions. Knowing the financial risks will help companies to effectively manage their financial strategies and budgeting. An example of too little awareness could be a company that does not take currency risks into account in international trade. If currency exchange rates evolve unfavorably, this leads to significant financial losses. After all, the costs for purchased raw materials or products then increase.
  2. Health risks: People who are not aware of the risks of their lifestyle typically develop health problems. Causes are obvious, namely alcohol abuse, too much or too poor nutrition, lack of exercise, smoking, daredevilry and irresponsible sports. Known conditions are obesity, diabetes, heart disease, cancer… Awareness of these risks makes some of them make healthier choices. In the food industry, it can give rise to contaminated products. For example, if a producer does not provide good hygiene practices or quality controls. This gives rise to risks for customers and almost always causes financial losses, reputational damage, and legal consequences.
  3. Safety risks: In physical environments, this gives rise to accidents and injuries in the workplace. Known for this are sectors such as construction, industry, and healthcare. In some places, many ignore safety regulations, such as wearing protective equipment. Sometimes the safety procedures are not observed. The legislator therefore requires companies to actively strive for a culture of safety. Making employees aware of the dangers in the workplace is part of this. A typical sector is the logistics sector. For example, warehouse employees who do not wear a safety helmet or forklift operators who race the forklift because they are insufficiently trained.
  4. Security risks: In cybersecurity, this leads to security breaches and data theft. Examples include phishing attacks, ransomware, or weak passwords that leave a company vulnerable. Employees who are not aware of the threats are a risk in themselves. After all, they are often the weakest link. Phishing attacks are a well-known example, as many don’t know how to spot suspicious emails. Training is therefore crucial. Especially within the supply chain, security is important. If a company is unaware of it, criminals can disrupt its operation in the supply chain. Security is also important for cities and the operation of their administration. An example of this is the ransomware attack in Antwerp. The international political environment is also vulnerable to cyberattacks targeting government agencies. For example, Russia was accused of cyberattacks on the U.S. government. That raised concerns about the integrity of the election and national security. Terrorism and border security are an ongoing concern for many countries. Terrorist groups try to cause political instability. For example, there was the rise of ISIS in the Middle East, which has led to security problems worldwide.
  5. Legal and regulatory problems: Knowledge of legal and regulatory risks in one’s own industry prevents legal problems, reputational damage, and fines. This is particularly true in the financial sector, healthcare, and food production. For them, it is super important to stay up to date with changing laws and regulations. Otherwise, their production can be shut down. An example is also the frequently imposed trade sanctions of the USA and the EU against China and Russia. This happens in response to political disputes. These sanctions have economic consequences. The land that imposes them often harms itself. The country that gets them must look for alternatives. For example, the sanctions against Russia have affected the apple orchards. A work-around was the sale of apple trees and relocation of companies from the EU to Russia. Human rights issues are also a problem. Countries can be criticized for human rights violations. This can then lead to international trade restrictions and other sanctions.
  6. Missed opportunities: Companies and organizations that are (too) conservative in their risk management hinder innovation. As a result, they miss opportunities for growth and new markets. In that case, they are too careful. Growth always goes hand in hand with risk. To this end, a good balance is sought between threats and opportunities. For example, if a retailer does not adopt new technologies or distribution methods in the supply chain, it misses opportunities for efficiencies and cost savings and opening new markets. Missed diplomatic opportunities arise in the face of political tensions and conflicts. For example, refusal to negotiate invariably leads to protracted conflicts. Not taking advantage of international cooperation is missing opportunities on a large scale. Countries that are reluctant to participate in joint climate change initiatives or trade agreements miss out on the benefits of global cooperation and economic growth.
  7. Personal problems: This can lead to debt, family conflicts and other stressful situations regarding people’s future such as burnout. In the supply chain and in many companies, personal problems will negatively affect operational efficiency and productivity. If management does not provide support to employees in such a situation, consciously or not, it will lead to a poor working environment and increased staff turnover.

Conclusion

Developing risk awareness requires education, training, and ongoing risk assessment in both personal and professional contexts.

Managing these risks also requires a proactive approach in the supply chain. A good supply chain risk management program can increase an organization’s resilience.

Managing these risks in the political environment requires a complex and coordinated approach, optimizing international cooperation through diplomatic efforts and security measures. The goal is to seize opportunities and minimize threats. Regulatory problems also affect international trade and relations.

Manu Steens

Manu works at the Flemish Government in risk management and Business Continuity Management. On this website, he shares his own opinions regarding these and related fields. Since 2012, he has been working at the Crisis Centre of the Flemish Government (CCVO), where he has progressed in BCM, risk management, and crisis management. Since August 2021, he has been a knowledge worker for the CCVO. As of January 2024, he works at the Department of Chancellery and Foreign Affairs of the Flemish Government. Here, he combines BCM, risk management, and crisis management to create a tailored form of resilience management to meet the needs of the Flemish Government.

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