Companies shifting focus out of effective risk management stand to lose in the long run, global advisory firm Ovum warned in its press statement Tuesday.

In a report entitled “Managing risk during an economic downturn,” the consulting firm said that the economic downturn has in fact increased the level of risks companies are exposed to, even if they are forced to do more with less. It added that the recent crisis actually exposed such cracks in the old paradigm.

“The financial crisis has provided a very high profile example of how poor risk management practices can severely impact not only a business but also a whole industry sector”, said Helena Schwenk, senior analyst, Ovum and author of the report. “While the banking system recovers and readjusts from the crisis and moves to a more tightly controlled and regulated risk management environment, other industry sectors are advised to take heed of the risk management lessons learnt from this painful episode.”

Companies can effectively handle risks in an enterprise environment, away from the isolated silo approach which tend to become detrimental to the company’s security, it said.

Ovum said much of the past failures were not due to failed risk management, but to lack of understanding and discipline as to how it should be done correctly. The firm pointed out that the inability to have a more holistic view of risk management and the lack of understanding of interdependencies among business risks can ultimately lead to failure in the future.

“The current economic crisis has also underscored the need to treat risk management not just as a strategic ideal, but also as an operational imperative,” Schwenk said. “Businesses need to make sure that risk management trickles down from high-level business strategy, objectives and goals to the operational coalfaces of the organization.” — John Mark V. Tuazon

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