Aside from the KonTraG, you should know the three typical, generic process risks. They offer an easy introduction to process optimization and supplement your risk management with non-financial risks.
Estimated reading time: 7 minutes
Why is risk management in processes so important?
Most larger companies carry out risk management, especially if, due to their size or structure, they are subject to the KonTraG, the law on control and transparency in the corporate sector.
Risk management in processes is crucial to ensure long-term success and financial stability. Particularly in the area of financial risk management, unexpected events or fluctuations in processes can have a significant impact on a company’s profitability. Through targeted identification, assessment and control of risks, potential losses can be minimized and opportunities can be optimally exploited. Effective risk management in processes allows companies to proactively prepare for various scenarios and strengthen their resilience to external influences. It is therefore essential to view risk management as an integral part of corporate management and to continuously improve it.
The importance of generic process risks
Generic process risks are potential obstacles or vulnerabilities that can occur in almost all company processes. They represent a constant threat to the efficiency and performance of a company. Identifying and eliminating these risks are crucial to the success of process optimization. They serve as a starting point for analyzing and improving processes to ensure smooth and efficient functionality in the long term. It is crucial to be aware of these generic process risks and take targeted measures to minimize them, paving the way for successful process optimization.
What generic process risks are there?
No.1: “The process is uncontrolled”
What does that mean exactly and what is the risk aimed at?
Employees carry out a process day in and day out, but there is no clear process owner who does or can do justice to their role. There are no clear process goals and no process control using process metrics. What should be done so that they can moderate this risk, i.e. get it under control?
You should appoint a process owner who not only has duties, but also real decision-making authority, especially in relation to line managers. No paper tiger! You can find out what the tasks and duties of a strong process owner are here Video!
Set process goals, of course derived from the company goals. Only when there are unmet process goals is there a reason to improve the process. Otherwise everything is fluffy and everyone has settled in comfortably. You can see exactly how to set process goals and what is important in this one Video!
In summary, the generic process risk: “The process is uncontrolled”. It’s about leading and controlling the process, no matter how poorly it goes in its current state. You need someone in charge and a direction. That’s what matters most.
No. 2: “The process is inefficient”
The second generic process risk “The process is inefficient” poses the risk of wasted time and resources as well as lower productivity.
Because there are unachieved process goals resulting from the treatment of the first process risk, it is immediately clear that it is running inefficiently. Think of an increase in productivity that is at least equal to the inflation rate! If you can’t simply raise the prices of your products because your customers will buy from competitors, then you have to become more productive.
At the same rate as the inflation rate if you want to keep your current margin. Bam, that really hits home. Many companies solve process problems, especially in the area of administration and office activities, by hiring employees. However, this only solves seemingly increasing volumes or other difficulties in the process. You are throwing people at the problem and not solving the root cause! In order to mitigate the risk of “the process is inefficient”, you should regularly talk about the process metrics and optimize the process together with the employees in regular CIP meetings.
An inefficient process can lead to delays, lower customer satisfaction and affect a company’s competitiveness. In order to minimize this risk, clear process steps should be defined, regularly checked and optimized.
Introducing automation and digitalization solutions can help make the process smoother and more efficient. Continuous training and employee participation can also increase awareness of efficient processes. A proactive approach to identifying and eliminating inefficient processes is crucial to strengthening a company’s performance and competitiveness in the long term.
No. 3: “The process knowledge is singular”
The risk that process knowledge is singular poses the risk that crucial information is concentrated on a single person or a small group of people.
That’s a really nasty process risk. If that person or group fails unexpectedly, then they have a real problem.
Now think about smaller companies such as craft businesses. How many of them happen that only the boss can write certain offers? Or only “Mrs. Meier” can handle certain projects.
The point is, with the generic process risk you can systematically question your processes to see whether there really is a second person for each step who could immediately step in as a representative in case of doubt. In conjunction with the skills matrix, this is an extremely valuable tool for immediate process stabilization.
How do you use the three generic process risks in practice?
Many process management suites have a GRC module. GRC is the abbreviation for Governance, Risk and Compliance.
Essentially, you can use this to build up your operational risk management. In practice, this means you add risk to your process and with the appropriate controls, the risk is mitigated. The corresponding evaluations give you an overview at a glance of where you should take action.
This can lead to bottlenecks and reduce the efficiency of the entire company process. To mitigate this risk, it is important to document and share knowledge. Through training and effective knowledge management, companies can ensure that important information is widely distributed and not dependent on individual employees. This strengthens the company’s resilience and minimizes the risks of knowledge loss.
Application of generic process risks in practice
The effective application of generic process risks in corporate practice is crucial for comprehensive process optimization. A proven approach to this is to use process management suites that have an integrated GRC module. By linking process management with governance, risk management and compliance, companies can identify, evaluate and control risks at an early stage.
An example of this is the BPM suite Adonis, which was specifically developed to support companies in holistic process optimization. With its user-friendly interface and powerful analysis functions, Adonis enables practical application of generic process risks. Companies can specifically integrate risks into their business processes in order to increase efficiency and minimize sources of error.
By consistently applying generic process risks in practice with the help of innovative solutions such as Adonis, companies are able to sustainably optimize their process landscape and thus be successful in the long term.
Conclusion on generic process risks
With regard to the present analysis of generic process risks, it can be stated that they play a crucial role in the success and efficiency of a company.
Reflecting on the significance of these risks makes it clear how important it is to identify and evaluate them at an early stage and to take appropriate measures. Only by proactively addressing these potential stumbling blocks can companies remain competitive in the long term and successfully achieve their goals.
With best regards from Bayreuth,
Yours, Axel Schröder
Image source: canva.com @kanchanachitkhamma