Companies traditionally had separate departments for determining the value of a plan versus managing the risk of that plan. Lately, the thinking has been that the two are more closely related than people had previously realized. However, integrating the two can take time, especially when the two departments seem to have different goals. As your staff learns to combine the two departments together, it may pay to have an integrated valuation and risk management (IVRM) analyst help out for a while.
Risk Depends on Value Analysis
The logic behind combining the two sides is that risk depends on value analysis. In other words, you can't really determine the true risk until you know what the value is and how that value will affect your company and the project in question. For example, switching vendors may seem risky if you've never worked with the new vendor before, but you could get a lot of value through better products and lower prices. In that case, the value would be worth the risk, and you can see how those two work with each other to make a final decision on whether to use the new vendor.
Because risk and value seem so closely intertwined, then, it makes no sense to have each analysis done separately. This doesn't mean that risk is subservient to value. In fact, maybe the value in the previous example seems worth it, but further analysis shows that there are additional issues with product compatibility or durability down the road. In that case, the risk might be too much. Both sides have to learn how to bat these ideas back and forth to ensure a complete picture emerges.
Convincing Both Sides to Work Together
Hopefully, your risk management department and other departments are all on friendly terms. They will have to work together more closely than before, especially if your company decides to do what some have suggested and create a new combined department. In the meantime, pay attention to what the IVRM analysts are doing as they evaluate your projects for value and risk. This process should serve as a model for your team.
If you like the work that the analysts did while consulting, ask them if they would consider helping with training your company to combine risk management and value analysis. If they do not do training themselves, they may be able to recommend another company that will. To learn more, contact a company like SCM Decisions.
