In the dynamic and ever-changing world of business, risk management is a critical factor that determines the success or failure of an organization. The ability to identify, assess, and mitigate risks is crucial in today’s competitive market. In the pork industry, however, risk management is often seen as a separate function, disconnected from the core business operations. This mindset may limit the true potential of risk management and its contribution to overall business success.
Traditionally, the pork industry has viewed risk management as a distinct activity, mainly focused on utilizing futures markets and other tools to limit exposure to unfavorable changes in commodity markets. Typically, a dedicated risk management team either exists within the organization or this function is outsourced to a third party. In either case, its integration with other departments such as production and operations is limited. This siloed approach may result in missed opportunities and an incomplete understanding of risks across the organization.
There is significant value in breaking down these barriers and bringing the risk management team, along with their expertise, tools, and experience, into the heart of the business. I understand there are some legal complexities that complicate this, but the opportunities are significant and, I think, worth the effort of sorting out the legal issues. By integrating risk management into core business decisions, organizations can enhance their ability to proactively identify and address risks, leading to improved operational efficiency, cost-effectiveness, and overall business resilience.
One area where integrating risk management can yield substantial benefits is biosecurity. In the pork industry, biosecurity is essential to prevent and control the spread of diseases among animals. It involves implementing various protocols and procedures to reduce the risk of disease outbreaks. However, no protocol is foolproof, and there is always some degree of risk involved. Balancing the risk of disease transmission with the costs and complexities of compliance is a delicate task. This balancing act is similar to what risk management teams face on a daily basis in managing financial risks, making them well-suited to contribute their perspectives and expertise to the biosecurity question.
By involving risk management professionals in biosecurity decisions, the pork industry can tap into their experience in assessing and managing risks. These professionals bring a unique mindset that focuses on identifying potential vulnerabilities, evaluating the probability and impact of risks, and developing strategies to mitigate them. Their analytical tools and methodologies could, with some adjustments, provide valuable insights to optimize biosecurity measures and strike the right balance between risk reduction and operational efficiency.
Beyond specific operational considerations like biosecurity, integrating risk management into broader business decisions can yield positive outcomes. For instance, even decisions related to salaries and benefits can be viewed through a risk management lens. When determining compensation packages, organizations need to consider the risk of losing talented employees against the costs of retaining them. By engaging the risk management team in such decisions, organizations can make informed choices that align with their strategic objectives while mitigating potential risks associated with employee turnover.
Integrating risk management across various business functions can foster a culture of risk awareness and proactive decision-making. When risk management becomes an integral part of the organization’s DNA, employees at all levels become more attuned to potential risks and opportunities. This heightened risk intelligence can drive innovation, enable faster response to market changes, and ultimately enhance the organization’s competitive advantage.
To successfully integrate risk management into the core of the business, organizations should adopt a holistic approach. This entails breaking down silos and encouraging cross-functional collaboration. Risk management professionals should be involved in strategic planning, budgeting, and resource allocation discussions to provide valuable insights and ensure risks are adequately considered. Additionally, fostering a culture that embraces risk awareness and open communication is crucial for effective risk management integration.
To summarize, every aspect of business involves risk management. In the pork industry, the traditional view of risk management as a separate function limits its potential impact on overall business success. By integrating risk management into the core of the business, organizations can unlock its true value. From biosecurity to financial decisions, the risk management perspective, tools, and approaches can provide valuable insights and improve decision-making. Embracing risk management as a strategic function can help organizations navigate uncertainties, seize opportunities, and build a resilient and sustainable future.
About the Author: Todd Thurman is an International Swine Management Consultant and Founder of Swine Insights International, LLC. Swine Insights is a US-Based provider of consulting and training services to the global pork industry. To learn more about the company, send an email to firstname.lastname@example.org or visit the website at www.swineinsights.com. To learn more about Mr. Thurman’s speaking and writing, visit www.toddthurman.me .