From the course: Protecting Profitability by Reducing Financial Risk

The ROI of risk management

From the course: Protecting Profitability by Reducing Financial Risk

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The ROI of risk management

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- Risk management regularly gets shoved to the back burner of corporate initiatives in favor of a host of more attractive topics like revenue growth, innovation, and marketing. These topics are better able to show a return on investment than risk management. While they are vitally important to the bottom line, risk management can also produce quantifiable metrics that will boost the bottom line of any company in any industry. Not only that, when done well, it will also boost the profitability of all those more attractive topics. One of the hardest business areas to quantify is risk management. The reason is because until a calamity occurs, it's hard to measure. Even after a calamity occurs, there are many hidden costs. The good news is that we can quantify the ROI on the investment of time and money on improving organizational readiness and preparedness. Let me give you a few examples. Unexpected downtime is more costly than ever. Various data shows that businesses lose between 926 and $17,244 for every minute that their operations are stalled. Those costs include lost revenue, lost productivity, recovery expenses, equipment replacement, and more. Here's the takeaway. You need to be doing everything you can to avoid downtime and speed up recovery if a disaster strikes. Think this might be overstated? Shut down your operation for just one day. Sit in your office alone and count the money that's being spent and lost because there is no business being transacted. 30% of businesses have no disaster recovery strategy in place. Statistics show that roughly one out of three companies have not adequately prepared for a disaster. In some cases, this means organizations have no documented business continuity plan in place or they haven't even considered what technologies or procedures they would need to keep operations going after a disruptive event. Not having a plan in place to protect your employees, your customers, and yourself is negligent. Major disasters are defined by the severity of the loss on time and money. Examples include physical losses like fire, tornadoes, and earthquakes. However, they also might include the less tangible cyberattacks, theft of intellectual property, and loss of reputation. Recovery efforts eat up 25% of staff time. Recovering after a disaster is a costly drain on productivity. When a disruption occurs, your employees are forced to shift their focus to restoring operations, keeping them away from their other priorities. This is why it's so important to minimize your recovery time objective, or RTO, with technology that makes it easier to return to business as usual. These quantitative metrics should make you scoot forward in your chair. Preventing even one crisis will have a tremendous impact on operations and your company valuation.

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