how risk control works
modern businesses face a diverse collection of obstacles competitors and potential dangers risk control is a plan based business strategy that aims to identify assess and prepare for any dangers hazards and other potentials for disaster both physical and figurative that may interfere with an organization s operations and objectives the core concepts of risk control include no one risk control technique will be a golden bullet to keep a company free from potential harm in practice these techniques are used in tandem with others to varying degrees and will change as the corporation grows as the economy changes and as the competitive landscape shifts utilizing a risk and control matrix racm for effective risk managementa risk and control matrix racm is a valuable tool used by organizations to better understand and optimize their risk profiles it is a structured approach that helps companies identify assess and manage risks by mapping the relationships between potential risks and the corresponding control measures implemented to mitigate them the racm allows organizations to visualize and evaluate the effectiveness of their risk control strategies and make data driven decisions to enhance their risk management practices the racm typically includes the following components by creating and maintaining an up to date racm organizations can gain a comprehensive understanding of their risk landscape and the effectiveness of their risk control measures this information can inform strategic decision making guide resource allocation and support continuous improvement in risk management practices this rcam example outlines different risk categories such as finance hr operations and it and includes specific risks within each category the likelihood and impact of each risk are assessed leading to an overall risk rating control measures are then listed along with an evaluation of their effectiveness finally action plans are proposed to enhance risk control measures or address identified gaps in risk management keep in mind that this is just a simplified example and an actual racm for an organization would likely be more detailed and cover a broader range of risks and controls examples of risk controlas part of sumitomo electric s risk management efforts the company developed business continuity plans bcps in fiscal 2008 as a means of ensuring that core business activities could continue in the event of a disaster the bcps played a role in responding to issues caused by the great east japan earthquake that occurred in march 2011 because the quake caused massive damage on an unprecedented scale far surpassing the damage assumed in the bcps some areas of the plans did not reach their goals based on lessons learned from the company s response to the earthquake executives continue promoting practical drills and training programs confirming the effectiveness of the plans and improving them as needed 1british petroleum bp has implemented several risk control measures following the deepwater horizon oil spill in 2010 which was one of the largest environmental disasters in history as a result of the spill bp was subject to a 20 8 billion settlement with the u s government and five gulf states in 2015 2 the company has since strengthened its risk management approach to prevent similar incidents in the future 3bp has focused on improving its safety culture including conducting regular safety training and drills for employees investing in advanced technology for better monitoring and control of drilling operations and implementing rigorous safety standards across its global operations the company has also adopted a systematic approach to risk assessment and management which involves identifying evaluating and prioritizing risks and developing tailored risk control strategies to mitigate potential impacts 4moreover bp has increased its efforts to promote transparency and stakeholder engagement the company now publishes an annual sustainability report that provides detailed information on its safety environmental and social performance as well as its progress in implementing risk control measures 5 this openness allows stakeholders to hold the company accountable for its actions and fosters a culture of continuous improvement in risk management starbucks a leading global coffee retailer has implemented various risk control measures to manage its supply chain risks the company sources coffee beans from multiple regions worldwide making it vulnerable to fluctuations in supply and potential disruptions due to weather political instability or other unforeseen events 6to address these risks starbucks has adopted a diversified sourcing strategy which involves procuring coffee beans from a wide range of suppliers across different regions 7 this approach helps the company reduce its reliance on any single supplier or region ensuring a steady supply of raw materials and minimizing the impact of potential disruptions 8furthermore starbucks has established a comprehensive set of supply chain standards known as the coffee and farmer equity c a f e practices these standards cover various aspects of coffee production including quality environmental sustainability and social responsibility by working closely with its suppliers and conducting regular audits starbucks can ensure compliance with these standards thereby minimizing the risk of reputational damage and potential supply chain disruptions 9in addition starbucks uses advanced supply chain management software to monitor its global supply chain in real time enabling the company to identify potential risks early and take appropriate action to mitigate them 10 this proactive approach to risk control has helped starbucks maintain its reputation for high quality coffee and build a resilient sustainable supply chain that supports its continued growth 