It’s been ten years since the Sarbanes-Oxley Act was passed, which created a need for better corporate governance, compliance, and risk management. In that time many steps forward have been made in the name of better and more transparent business practices. However, despite this recent momentum, it seems that for some, this effort has only created more risk management problems along the way. The main problem in most of these cases appears to be the lack of clear success on the part of these companies in properly defining risk. Instead of considering these threats on the broad, global basis that they should, they choose to focus too specifically on just a few select subsets. For example, those culprits may focus entirely on compliance issues and operational risks, which only account for a small part of all risks, ignoring much larger threats at their peril.

It would seem then that, to be truly effective, companies should develop a comprehensive risk management strategy that tries to anticipate and prepare for risks in all possible areas and not just those that seem most likely, so that they do not end up unprotected in the face of a risk. degree or another, this, however, would also be a tremendous mistake, another drastic problem many risk management programs face is that they seek to be too broad and end up becoming too spread out, being unable to adequately maintain compliance with those areas that actually matter more to a given company. If this were to occur, a company’s risk management program would essentially invalidate itself by overreaching its capabilities until it was rendered useless.

A recent study that looked at risk management in more than a thousand companies found that the biggest risk area organizations should be concerned about, the one that has done the most damage to most businesses, is strategic risk issues. Ironically, this has also become one of the least considered areas of threats among many companies. To correct this problem, companies will need to start by reassessing how they define risk factors by taking a closer look at how their organization is managed and which areas may present the biggest possible problems in the future.

Ultimately, the answer is moderate, thoughtful, and careful planning. The central tenet of any good risk management program, and the one that most companies often seem to overlook, is that such programs are a full-time responsibility that must be constantly monitored. and maintained. This will mean that a risk management team will need to be in charge of keeping track of all potential mitigating factors, to assess their relevance, severity and proximity, taking it all into consideration while being decisive and staying focused on those factors that They represent the greatest possible threat to the company. Done correctly, risk management is far from a simple matter, however the benefits it can provide by strengthening a company’s corporate governance practices and protecting it against any number of undue losses are invaluable.