In the business arena, “risk” is a loosely defined term that describes any non-predictable, non-avoidable disruption to standard business practice. In a world without risk, a well-researched plan will account for all possible turns of events, and will unfold toward a defined and predictable end point. A carefully detailed budget will cover all expenses that arise during a given fiscal year. Estimated revenues will be realized. And anticipated shifts in the business landscape will all come to pass. But since we don’t live in that world, an effective risk analysis can be used to examine the year ahead and account for anything including the failure of a production machine, the unexpected loss of a key employee, a cyber-attack, or a natural disaster. Risk, by nature, cannot be entirely eliminated. But potential risks must be analyzed and accounted for in order to build flexibility and agility into procedures, budgets, and staffing plans.
According to recent research, the US manufacturing industry falls far behind when risk management and assessment practices are measured against those of other industries. If you’re a strategic planner or decision maker within the manufacturing sector, here a few key risk management factors to consider.
Innovation Means More Risk, Not Less
Innovation and rapid technological evolution can be a boon for any business that depends on manufacturing productivity and efficient distribution. While new technologies and advanced equipment can speed production and eliminate errors and the waste of raw materials, each innovation requires an expensive investment and a period of implementation. On order for modern manufacturing enterprises to stay competitive, innovation should be monitored closely. Analysts should take the long view and make data-based decisions before investing in machinery and software tools. Not every solution actually brings cost effective results.
Building Supply Chain Resilience
A company’s supply chain represents a key area of critical risk, since vendors and contractors drive productivity but also represent areas of exposure and disruption. Constantly monitoring supply chains and making predictive decisions can prevent damage to a company’s brand, product quality, and reputation. Supplier contracts should be under constant review and changes should be made quickly when necessary.
Staffing plans and internal talent pipelines can also protect an organization from destructive and expensive disruptions. Does your company have a built in contingency plan in the event of a sudden departure at the executive level? Do you have replacements in mind who can be promoted or recruited from within? For more on how to maintain staffing agility and protect your company from the unexpected, arrange a risk management consultation with the staffing experts at CSS.