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In a report issued by Deloitte on risk planning for 2014, they identified a strong trend towards adoption of "Strategic Risk" planning.

There are several areas of traditional risk planning that companies undertake; operational, financial and compliance. Strategic Risks, on the other hand, are a type of risk either created by the businesses' main strategy or that directly affect the companies' operation.

The Director of Enterprise Risk Management for Coca-Cola phrased it by saying "It used to be that if certain risks were to happen, a company could have up to one news-cycle to respond, but the speed of risk is so much greater now... That’s one of the biggest differences today versus even three or four years ago.”

An example of this quick loss of reputation was July 2013 when federal prosecutors indicted five men from Russia and the Ukraine in the single largest cyber fraud case in history, costing several hacked companies more than $300 million dollars. Hackers targeted various companies to steal credit card information such as JC Penney, Visa Inc., Jet Blue Airways, and others. The incident affected companies operating in numerous jurisdictions with litigation and reputation costs in the hundreds of millions of dollars.

Because of factors such as continued globalization, social media and fast spreading information, companies no longer have time to allow traditional or slow moving risk strategies to govern their risk planning. Strategic Risk planning must involve the CEO and directors of a company and be integral to the organization's strategy.

The Deloitte study found that for 2014, over 81% of surveyed companies are now explicitly focusing on a Strategic Risk strategy, rather than a silo'd risk strategy.

The single biggest change in the transition from silo'd risk planning to central Strategic Risk planning over the last 4 years has been a resurgence of long term, rather than short term strategy. In fact, over 94% of companies surveyed said they have actively changed focus over the last four years from a reactive, silo'd corporate risk strategy to a long-term, Strategic Planning approach.

The causation behind this dramatic shift to Strategic Planning which 94% of companies are now embarking is the heightened fear of reputational risk, driven by the aforementioned fast news cycle and proliferation of social media. Smart companies are recognizing that a reactive risk strategy is no longer sufficient to protect their organization from litigation, supply chain disruption and loss of reputation.

An integral part of developing a long-term Strategic Planning focus at any company is effective financial screening and certificate of insurance tracking for vendors and suppliers. Before a vendor-related incident leads to unexpected litigation or loss of reputation, every vendor in a supply chain should undergo a thorough legal screening, safety screening and certificate of insurance tracking and audit process.

Topics: Business Credentialing Service, Certificate of Insurance, COI Tracking, ERM, Financial Screening, Insurance Certificate Tracking, RISK, Uncategorized

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