Serious health risk has been with us for more than a year now.
That’s because it has been one year since COVID-19 hit American shores. One year into this pandemic and for many, it has been devastating. In the U.S., as of this writing, more than 27 million people have contracted coronavirus, with nearly 470,000 of them dying of the disease.
Further, it has affected all kinds of businesses, many of which we would not expect. We all know that the foodservice industry is suffering. Retail, not much better.
But did you know the virus has also impacted car repair facilities, the professional cleaning industry, and even dry cleaners? Recently it was reported that dry cleaners in the Chicago area have seen their businesses fall through the floor. One dry cleaner reports having 1,000 regular customers, but since COVID that number is down below 300.
Discussions of risk usually involve evaluation of both probability and severity. The above examples refer to the severity of the pandemic and the problems it has caused.
But, when it comes to risk management, there is one more dimension we need to explore and that incorporates a time element. This attribute is referred to as the risk velocity.
We can learn a lot from risk velocity, and what we learn can help organizations become much more resilient and better able to cope with difficult situations in the future.
But first, a definition. Risk velocity, or the velocity of risk as it is sometimes called, can be defined as:
How fast exposure to an event impacts an organization. It is the time between exposure to an event and when an organization feels its effects.
Sometimes risk velocity is slow. For instance, if the government passes new regulations on manufacturers but gives them five years to meet them. The velocity is slow, but the risk would certainly not be insignificant. Action may be required immediately even with a five-year time horizon.
Other times, risk velocity is breakneck. For example, the sudden demise of the company CEO or any other important stakeholders could pose a serious financial risk to the organization and its operations. Though there are several companies that provide keyman life insurance to manage such situations, the risk velocity would still be high. Similarly, recent experiences in the restaurant industry offer a perfect example. In February of 2020, we heard of the coronavirus in China; by March, it was here in the U.S. Soon, bars and restaurants were forced to close because they were viewed as breeding grounds for the disease.
In this case, risk velocity was extremely fast, about one month, leaving many restaurant owners stunned: unsure of what exactly happened; what might happen next; and whether their restaurants would survive the speeding chain of events. As we now know, many did not.
What the pandemic has taught many organizations is that along with measuring the severity and probability of risks, we must also concern ourselves with how fast this chain of events can happen and affect an organization. With this awareness, what should colleges and universities, and corporations around the world do to protect themselves?
Some important first steps:
- List each risk that could impact an organization. This could be a tornado, someone hacking company computers, even the kidnaping of a company executive. Often this is based on incidents that have happened in the past.
- Determine how quickly it could negatively impact the company. Is risk velocity slow or fast?
- What recovery options are most appropriate for each risk. If the risk velocity is fast, swift action may be needed to reduce the impact on the organization, allowing it to return to business as usual. Often this involves such things as emergency communications with executives, staff, vendors, and even customers.
And what often must also be considered is if the organization can make these determinations on its own. Very often they must turn to fresh eyes — risk management organizations that have dealt with these situations before. By getting various certifications, such as an iso 31000 2018 certification Australia based companies might have an option, as these risk management companies can keep organizations prepared to meet most if not all contingencies in the future.
An astute risk management firm in today’s world knows disruption is the new normal. They can help their clients grapple with risk velocity, so they are in a better position to thrive in our increasingly volatile world.
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Chief Executive Officer