Guide: Risk Management Strategies To Future-Proof Your Organization

Risk is as sure as taxes and death as long as you’re in business. But it’s no excuse to close down operations or forgo business opportunities. In fact, a popular corporate maxim says that the biggest risk in business is not taking risks. However, it isn’t a green light to dive head-first into business without a well-thought-out plan. And this is where risk management strategies come in.

Risk management is the systematic process of identifying and evaluating potential threats to an organization, and devising proactive and preventive management/mitigation strategies to counter these threats. With modern global commerce, risks are more pervasive and interconnected, especially if you depend on the international supply chain.

It’s no wonder that in a 2024 State of Risk Oversight report, 65% of executives surveyed said they have experienced a substantial increase in the volume of more complex risks over the last half-decade. In response, 37% of organizations in the survey said they’ve officially established an enterprise-wide risk management process to tackle these escalating risks.

You should also establish dynamic risk management strategies customized to your organization’s risk profile. Fortunately, this guide explores the different risk types modern organizations face, including potential threats and unforeseen disruptions, and provides practical examples of risk management strategies.

Different Types of Risks Organizations Face

Organizational risks transform and elevate as a business grows. The threats you face today may be more complex or totally different a few years down the line. The 2025 Global Risk Report created by the World Economic Forum listed potential global risks in the next two to 10 years including:

• Next two years: Geopolitical risks, such as state-based armed conflict, and technological risks, such as misinformation
• Within the next decade: Environmental risks, such as ecosystem collapse/shortages of natural resources, and societal risks, such as societal polarization

While these global risks aren’t industry-specific, they highlight the interconnectedness of risks. For instance, environmental risks like natural resource shortages will trigger supply chain disruptions in multiple industries. With this background information, you can better understand the dynamic nature of each risk type we discuss below.

Strategic Risk

Strategic risk refers to the threats posed by the organization’s business strategy and the potential for that strategy to fail. For example, a company may decide to enter a new market to expand its customer base. While this move can bring significant growth, it also comes with strategic risks such as misjudging the market demand, misunderstanding local regulations or facing unexpected competition. If the company’s market entry strategy isn’t well-researched and planned, it could lead to substantial financial losses and damage to its brand reputation.

Implementing a robust risk management strategy, like conducting thorough market research and having contingency plans, helps mitigate strategic risks and supports successful market expansion.

Operational Risk

This is the most immediate outcome of almost all organizational risks. It’s the downtime and operational breakdown caused by the disruption of normal business activities. Internal operational risks often result from a chain reaction in which minor omissions like poor employee onboarding/training cause staff to make mistakes like using the wrong equipment. External operational risks are triggered by many factors, such as vendor failure, logistics issues and physical events like natural catastrophes.

Financial Risks

Economic uncertainties trigger compounding risks to organizations. For starters, prospective customers may suspend or cut back on spending as an austerity measure. B2B and B2G companies are especially hard-hit by a declining economy because government and institutional budgetary cutbacks are often to the tune of millions. This underscores the need for effective loss prevention strategies and a well-devised contingency planning framework to navigate financial instabilities.

Reputational Risk

This is mostly triggered by negative customer experiences, from defective products and poor customer service to late deliveries, security breaches, or bad public relations. Reputational risks damage a company’s success and existence, and some organizations never recover from really bad PR failure, especially when it’s widely broadcast via social media. Protecting your company’s reputation should be a priority to prevent long-term detrimental effects.

Personnel Risk

Unless all your work operations are 100% automated, you rely on human input to sustain operational continuity. This exposes you to human risks that include:

• Market skill gap: You may not readily find ideal candidates with the specific professional skills you want, especially for roles that require niche skills like machine learning engineers or blockchain developers.
• High attrition rates: Employee attrition is a constant challenge in the modern workplace. A 2024 Gallup report stated that employee turnover risk was at its peak since 2015. High turnover rates disrupt operational continuity, which causes losses.
• Ineffective leadership: High-level managers sway a company’s performance through their decisions. Bad decisions trigger adverse business outcomes, risking an organization’s future. This makes a case for having a strong risk management team in place.

Technology & Artificial Intelligence Risks

The rapid adoption of AI-driven technologies like automation, robotics, inventory, and supply chain optimization in business operations has introduced new AI risks. For instance, feeding automated systems incorrect or low-quality data yields biased and erroneous results that can trigger massive process disruptions.

Additional AI risks relate to vulnerability to cybersecurity threats. For example, a malicious actor can hack into a company’s system and reprogram the AI system to disrupt normal operations. In such cases, getting things back in order can take time, meaning extended downtimes. This makes a strong case for real-time data monitoring to mitigate these risks.

Third-Party Risks

Working with third-party contractors is naturally risky because you can’t control all your external parties’ data security or business practices. It’s even more complex if you outsource to multiple international third parties subject to varying jurisdictional regulations. This necessitates a robust risk awareness strategy.

Third-party risks are multi-faceted, encompassing several organizational aspects, including finance, cybersecurity, and compliance. Collaborating with external contractors requires information exchange. If a third party mismanages such crucial information or is affected by a data breach, your company’s data security is also compromised. Additionally, if a contractor gets into legal, financial, or supply chain problems, your organization will be affected.

A reliable risk management strategy for external vendors is drafting an all-inclusive third-party service level agreement that spells out the operational or security standards expected. You should also leverage a trusted third-party risk management software like Onspring to help you vet and onboard external vendors and manage your risk exposure.

Supply Chain Disruptions

If you have a large ecosystem of third parties, you likely have suppliers in the mix. The global supply chain is complex and interconnected with many moving parts. An entire industry can be reliant on multiple suppliers spread across the world. Thus, a disruption in a far-off country can quickly affect your U.S.-based operations.

For instance, if you rely on Chinese suppliers, extended congestion in the Port of Shanghai may delay supplies and cause you to breach your delivery promises. To avoid such scenarios, one of the risk management strategies you can implement is diversifying suppliers or holding sufficient safety stock. This helps in managing potential disruptions more effectively.

Cyber Security Threats

Cyber threats are two-fold because they can occur internally or externally, posing a massive threat to your company’s IT ecosystem. However, insider threats have recently escalated, and 83% of organizations reported experiencing at least one insider attack between 2023 and 2024. The top three triggers of insider cyber attacks are:

• Complex IT ecosystems: They foster human errors like data entry errors or employees falling for phishing attacks.
• Adoption and integration of new technologies: This transition phase allows malicious insiders to leverage system vulnerabilities within the newly integrated IT system.
• Insufficient security measures: Many organizations fail to keep up with the ever-changing data security protocols that often need substantial time and resource investments to complete successfully.

Cyber threats trigger operational, compliance, reputational, and financial consequences. For instance, a cyber attack on your enterprise management system will expose your business’s confidential data. This would paralyze your operations, damage your reputation as customers value data privacy, put you in bad books with data protection authorities, and cost you substantial amounts to repair damages. According to an IBM report, data breaches cost companies an average of $4.88m in 2024.

Regulatory Compliance Risks

Every industry has a set of compliance regulations that every business must follow to operate legally. For instance, many organizations handling protected health information are bound by the Health Insurance Portability and Accountability Act (HIPAA). Companies follow the Sarbanes-Oxley Act (SOX), the Gramm-Leach-Bliley Act (GLBA), and other pertinent financial reporting and data security regulations. All these contribute to a structured approach in ensuring legal operations.

Abiding by such regulations, which often come with stringent instructions, is a challenge, particularly for developing companies with an insufficient workforce. Worse still, authorities often revise these regulations to include new provisions as fresh developments occur.

For instance, HIPAA was last revised in 2024 to include provisions for disclosing reproductive healthcare information. Keeping up with the series of updates creates informational gaps that can breed errors that lead to non-compliance.

Examples of Risk Management Strategies

If you over-emphasize the risks above, you’ll be immobilized by analysis paralysis and fail to make any serious progress. But this shouldn’t be the case because you can implement different types of risk management strategies, including contingency planning, to minimize risk levels and run business operations profitably. Let’s discuss each risk management strategy and its contribution to organizational success.

Risk Sharing

This is when two or more companies with a shared interest collaborate on a project and share liability, responsibility, financial investment, and rewards. Peer companies often choose this option when undertaking flagship projects with high risks and great rewards. This way, the financial risk associated with the project is shared among the partnering companies. A recent high-profile example of risk sharing is the collaboration between Toyota and BMW on a hydrogen fuel cell technology development project.

Risk Reduction

This is the go-to strategy for most companies. It involves identifying and evaluating the risk profile of each threat and then developing a befitting strategy to reduce the risk level. For instance, if a company identifies potential operational risks because of high season demand, it can reduce the risk by employing more part-timers to fill the labor gap during peak season.

Risk Strategizing

Strategizing is an example of a risk management strategy that’s more elaborate and takes a broad view. With risk strategizing, you outline and review all potential risk factors and scenarios your company faces and create a master plan to mitigate them and positively influence the outcome to a certain degree.

Risk strategizing is a proactive, long-term, continuous process that mitigates current and future threats. Most risk professionals leverage it when venturing into a new market or introducing a new product to the industry. It involves processes such as conducting customer surveys and risk analysis in the early stages of market entry or product development. This will contribute to informed decision-making processes.

Risk Experience Analysis

If your company has been operational for a while, you have experienced different risks first-hand. You have actual data on how specific risks affected your company’s performance and financial outcomes. Risk experience analysis entails reviewing risk data from past events and then leveraging the derived insights to craft data-backed risk management strategies.

With this strategy, you study risk patterns for a set period and establish the repeating sequences and the vulnerabilities behind them. This way, you can predict the risk levels an organization may face in the future if such sequences repeat. Access to such information enables you to plan risk mitigation strategies in advance to ensure you’re not caught off guard.

Risk-Reward Analysis

Risk management should be efficient and practical. The results of your risk management strategies should be worth or more valuable than the effort you input. And this is where risk-reward analysis comes in. With this approach, you A/B test projected risks and rewards and establish the optimal outcome level that’s profitable for your company. You also establish the break-even point where the risk management efforts and expected rewards balance out. This balance supports better business experiments and calculated decisions.

Third-Party Risk Assessments

This preventive risk management strategy involves vetting third-party vendors and contractors to establish their credibility and avoid those that can expose your company to various risks. It involves reviewing a third party’s financial, legal, reputational, and data security statuses to determine whether they’re ideal to work with or not. Today, assessing third-party risks is easier and more systematic thanks to sophisticated third-party risk management software available in the market today.

Risk Acceptance

This is an organization’s capacity to recognize the unavoidable risks in their line of work and streamline operations to accommodate the risk effects. For instance, as long as you’ve employed people to conduct operations, human errors will always occur at one point. Risk acceptance is acknowledging human errors will occur and drafting strategies beforehand to counter the risks or reverse the risk effects.

Risk Avoidance

In some instances, particularly when your risk-reward analysis projects negative outcomes, it’s more prudent to avoid the risks altogether. While this may mean lost business opportunities, sometimes it’s better to keep the bird in hand than hunt in the deep bushes for two more birds you aren’t guaranteed to catch. Risk avoidance puts risks and rewards on a weighing scale and avoids the risk types that outweigh their rewards.

Risk Transfer

This transfers risk liabilities to a third party who assumes the financial burden of specific risks. Simply put, it’s insuring your business with an insurance company to shield it against the outlined risks. Your insurer reviews your industry and business standing to determine how much premium you’ll pay for your business insurance coverage.

Risk Buffering

This is a preventive risk management strategy for cushioning your business against future risks like inventory stockout or supply chain disruptions. It creates reserves or backup plans that absorb the impact of risk exposure and shield your company’s central processes from losses. Risk buffering hedges your core operations/products/services from disruptions and ensures business continuity even when exposed to varying risk levels.

Automating Your Risk Management Strategies

Onspring has been the top GRC software in Info-Tech Research Group’s Leader Quadrant for five years running. The Info-Tech Research Group data quadrant evaluates and ranks products based on feedback from IT & business professionals — real end-users — and compares that feedback to all other category vendors. Try our product today and create effective risk management strategies to safeguard your organization’s assets and ensure operational efficiency.