Enterprise Risk Management in the Age of the Coronavirus
Many project professionals don’t include unforeseeable circumstances in their risk log, unless their projects are being executed in an area where natural and unavoidable catastrophes are known to occur. Due to the dynamics of geopolitical events, they may not be included during the initial risk identification process. As the project progresses, however, the risk log should be updated to identify the impact of these risks on project progress and the enterprise as a whole.
Risk management strategies help project management practitioners forecast and evaluate risk, while also identifying ways to avoid or minimize their impact on desired project outcomes.
Conducting SWOT on COVID-19
Late last year, news of a novel illness affecting a city in China failed to capture the attention of most people and businesses around the world; many thought the impact would be similar to SARS or swine flu—a blip on the breaking news radar and no real threat to the global economy. They were wrong.
Many organizations failed to consider the COVID-19 outbreak an enterprise risk and continued their business-as-usual operations. Around mid-February, I met with colleagues and friends who work in the telecommunications industry, and they expressed their concerns about how their projects would be impacted if the factories in China that produce the electronics needed for their work shut down. They wondered if that would break an important link in their supply chain and if it would jeopardize the final delivery of their projects.
Those in the telecommunications industry were not alone. Supply chains in multiple industries have strong ties to China. By the time they were primed to react, the risk was already an issue and without the procedures to avoid or minimize the impact, industries and countries were facing a pandemic with no plan in place.
Sharing enterprise risks identified during the planning and strategic phases of a project isn’t always a common practice within organizations. But not being aware of such risks has a direct impact on project success, and important assumptions may not be considered for the projects and programs that lie ahead.
People in charge of developing the multi-year strategy at an enterprise can use SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis to identify potential risks. This analysis uses a matrix, in which the strengths, weaknesses, opportunities and threats are listed and prioritized.
The SWOT matrix can be evaluated and updated as the enterprise strategy is reviewed or on an ad hoc basis. Moreover, threats identified during the SWOT analysis may have an associated opportunity. For example, in the event that the plant producing vital electronics in China shuts down, it will impact the supply chain. An opportunity to avoid that threat would be identifying another country where the vital electronics could be produced in order to reduce supply chain disruptions.
As we’ve learned, the importance of communicating the risk identified by the enterprise risk management process needs to be shared with business units to achieve strategic alignment and empower teams to achieve strategic objectives.
As a project professional, how do you interact with the strategic team within your organization to learn about enterprise risk?
Writer: Conrado Morlan