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Risk Management

A New Approach to Risk Management in Manufacturing

Posted by Jason Cope, CPA on Jan 28, 2019 1:47:00 PM

The latest technology is making it easier for manufacturers to increase automation, self-diagnose problems and monitor the efficiency of their operations. At the same time, manufacturers encounter daily risk in their organizations that range from operational and financial to those affecting reputation and third-party vendors. Of the fastest-growing risks are those related to cybersecurity breaches, cloud computing, and sensitive data loss. Unfortunately, the more you are integrated with other companies across the U.S. or the world, the more you are exposed to cyber threats.

How should manufacturers walk the line between maximizing the potential that technology offers while protecting their operations, employees, customers, and third-party vendors? Obviously, new frameworks of protection are needed to protect your assets.

According to a recent report by the Aberdeen Group, “Optimizing Organization Performance with Operational Risk Management,” there are steps you can take as you approach new ways to manage operational risk management, including:

  1. Adapt technology to fit your people and processes: Make it easy! While any new approach will require some degree of training, make it easy to integrate technology with your current processes.
  2. Standardize risk assessment across your enterprise: This removes the subjective analysis of an event and helps your entire organization understand the severity of various risk levels.
  3. Align operational data with financial data: You can’t remain profitable if you don’t first understand the financial impact of operational issues.
  4. Establish contingency policies and escalation procedures: As an ongoing process to document and prevent risk, manufacturers must have a contingency plan that everyone in the company understands and can execute when an adverse event takes place.
  5. Establish ownership: Who in the organization is responsible? Are you embedding risk awareness and management practices across your organization? Your risk and enterprise risk management (ERM) plan will only work if everyone knows their roles.
  6. Fully commit to the process: Any risk plan must have buy-in from the top down. Don’t forget your third-party vendors and R&D groups. Everyone must be on the same page.

In the Aberdeen survey, 41 percent of manufacturers said they need to build a risk awareness culture throughout the organization. It is advisable to integrate risk mitigation with your strategic planning process. By improving operational risk management, your company will be laying a foundation that will lead to risk awareness and encourages a collaborative environment within your operation and those with whom you interact. 

By creating a culture of risk awareness, you will be able to reduce operational risks that have a potential impact on financial objectives.

Goldin Peiser & Peiser can help you take advantage of technology and cost-efficient practices in your manufacturing business. To learn more about our Manufacturing and Distribution Group, contact Jason Cope at 214-635-2508 or fill out the form below.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Manufacturing