How to Manage Risk with Better Business Intelligence
Updated on October 22, 2024.
Risk management is an essential component of business leadership. Identifying and reducing the impacts of costly risks sets effective leaders apart from the competition. The big question for leaders is how to manage risk in a changing business world.
Business intelligence tools are a critical part of managing modern businesses’ risks. Not only are companies that leverage business intelligence five times more likely to make intelligent decisions faster than those that do not but companies with CEOs who make data-driven decisions are 77 percent more likely to succeed than companies with CEOs who do not.
Integrating business intelligence concepts into risk management strategies is essential for modern organizations. A good starting point for managing risk with business intelligence is understanding different types of business risk.
Types of Business Risk
Frequent changes in consumer sentiment and the global economy represent risks to any company’s bottom line. Business risks can also emerge from inadequate preparation, poor staffing decisions, and other internal processes. Leaders involved in risk management planning need to understand the different types of risks on the horizon.
A PwC Pulse Survey of risk leaders from Fortune 1000 companies identified several categories of business risk. Respondents most commonly cited compliance and regulatory risk (35%) and cyber risk (35%) as the greatest threats to their companies. The landscape of current challenges to risk leaders include:
- People-centered risks (33%)
- Technology risks (31%)
- Third-party risks (31%)
- Industry-specific risks (30%)
- Clients and product risks (30%)
We can dig deeper to find specific risks challenging corporate leaders worldwide. An AON survey of 2,842 executives elaborated on the risk categories listed above. Respondents are trying to build resilience in their organizations against challenges like:
- Data breaches and cyber attacks
- Business interruption
- Economic slowdown
- Failure to attract or retain talented employees
- Shifting regulatory environments
Data breaches cost businesses an average of $4.5 million per incident in 2023, while the COVID-19 pandemic led to business disruptions averaging $182 million per year. Leaders can use data-driven decision-making to better prepare their organizations for present and future challenges. Business intelligence makes these decisions possible.
Exploring Business Intelligence
Business intelligence is often seen as the hardware, software, and processes involved in producing insights from raw data. This definition doesn’t fully account for the people and corporate culture necessary to turn insights into action. Eighty-one percent of surveyed executives invested in data analytics based on the COVID-19 pandemic; this was not only an investment in technology but well-trained personnel.
Data visualization platforms and reporting tools provide the resources necessary for risk assessments. Decision-making based on these insights, though, requires an organizational commitment to data. The BARC Data, BI and Analytics Trend Monitor 2024 found the top trends involved in business intelligence included:
- Data quality management
- Data-driven culture
- Data governance
Coffee company Kopi Kenangan offers an example of how a data-driven culture manages risk. The company faced high risks related to poor hiring decisions and overspending, especially as it grew its online retail division. Scattered data sources made it impossible for company leaders to make quick and effective risk mitigation decisions. The answer was a business intelligence solution fueled by real-time analytics and equips executives with the information they need to make data-driven decisions. This solution has streamlined processes, reduced costs, and automated matching of applicants to open positions. In other words, the solution has not only improved the company culture but has mitigated multiple significant risks.
Four Components of Risk Management
1. Risk Identification
Risk identification ends up becoming a largely subjective task without relevant data. Conversations about lessons learned, what worked well and what did not, and business constraints remain general without data. These discussions may be useful for broader planning but they lack actionable insights without business intelligence.
Companies can strengthen their risk identification processes through data analytics. As a fast-growing enterprise, the Bank of India wanted to spend its capital on developments like new products and services to offer to customers. Instead, they needed to hire more staff members who could manually identify and manage operational risk.
Bank of India decided to try a SAS business intelligence solution that would free them from unnecessary staffing, eliminate their dependence on spreadsheets, and improve their capacity for risk identification. Rather than needing individuals to check in with their 4,892 branches, the Bank of India now collects loss data directly via a central platform. They also receive key risk indicators from the banks through an automated process, strengthening the bank’s risk identification measures.
The bank’s business intelligence tool reduced risk in and of itself by eliminating the need for overstaffing and decreasing the risk of human error in manual risk management. When it specifically comes to risk identification, data sources — such as the automatically reported key risk indicators — improve that stage of the process considerably.
2. Risk Assessment
One of the greatest assets of business intelligence in risk management is the ability to visualize data quickly, specifically, and regularly. This is especially useful when it comes to assessing risk. Companies face a myriad number of risks each day. Some risks have a higher likelihood of occurring than others, and some risks carry the potential for more damage than others. Big data analysis and visualization made possible by business intelligence tools help key stakeholders make data-driven decisions about which risks they should prioritize mitigating.
Mitsui Leasing, an automotive finance company, faces risks when extending credit to customers. Each customer carries a different level of risk and the company’s livelihood depends upon making wise decisions about loan applications. Determining a customer’s risk level took longer than the company wanted. In the case of a customer defaulting on their payments, the company lacked the infrastructure for an effective corrective action plan that could be tracked and assessed for risk.
The company now uses Tableau to assess credit risk in customers and potential customers. Assessments that used to take seven days are now instantly available. The 177 visualizations made possible by Tableau help Mitsui Leasing’s leaders and employees make quick, effective decisions when conducting a risk assessment.
3. Risk Response
Beyond identifying and assessing risk, business intelligence tools can help mitigate or eliminate risk.
One of the greatest risks to many companies in the data economy is data loss. Typically, human error leads to loss of data as employees manually work with data and may accidentally manipulate data in detrimental ways. A business intelligence solution acting as a storage system and a suite of tools for user-friendly data manipulation and visualization mitigates this risk by reducing the amount of human error that could affect a company’s data.
Mattress producer Ortobom faced a high risk of data loss or compromise. The company had a growing volume of increasingly complex data to process. Their IT manager was spending up to 80 hours each month on database management and ensuring that their data was continually backed up.
The company decided to implement Oracle business intelligence tools. Now, the backups their IT manager spent so much time conducting are automated. Company leaders know that their data is safe and recoverable at all times. The benefits don’t stop there: the company also increased the speed of its ordering processes, has greater security, and makes more effective and efficient decisions.
4. Risk Monitoring and Reporting
Companies have long relied on manually updated spreadsheets and the occasional slide deck to display their risk assessment findings. However, such tools are inherently limited. They require constant manual adjustments, which uses up employee time and increases the possibility of report errors.
A business intelligence solution that provides data visualization tools can transform corporate risk monitoring and reporting processes. Such a solution not only helps businesses to conduct risk analysis but also empowers leaders in risk management to present their findings in ways that are palatable for key stakeholders in other departments.
Woodbridge, a global leader in integrated systems manufacturing, underwent such a transformation. The company needed to elevate is reporting system to account for more than 7500 employees across 21 countries. They were using a spreadsheet-based tool, which was time-consuming and open to frequent errors.
The company turned to SAP App Center for a better solution. The business intelligence tools they implemented streamlined their risk management processes and automated their risk score reporting. The solution offered customizable scorecards and transparent reporting for areas like quality, hazards, and behavioral and environmental risk factors. Thanks to business intelligence, Woodbridge now has a streamlined global risk management procedure, higher employee morale, and maximized safety in the workplace.
Become a Data-Driven Risk Management Leader with a DBA in Business Intelligence
Do you want to become a leader in risk management who knows how to leverage business intelligence tools at every stage of risk management processes? Are you interested in data analysis, identifying key insights, and creating data visualizations that can communicate how to mitigate the potential risks a company faces? If so, the Online Doctorate of Business Administration (DBA) in Business Intelligence at Marymount University equips you with the skills and tools you need to manage risk with business intelligence throughout your professional career.
The fully online DBA in Business Intelligence features in-depth coursework in data visualization and data strategy. Faculty members with real-world business experience work with DBA candidates in courses like:
- Ethical Leadership for Success in Uncertain Times
- Maximizing Digital Transformation
- Strategy in a Changing Business Climate
The online DBA in Business Intelligence is a cost-effective program that can be completed in as few as three years. Students tailor their coursework to their professional goals and complete applied dissertations based on real-world business intelligence challenges. DBA graduates join alumni worldwide and benefit from Marymount University’s proximity to Washington, D.C.
Learn how you can become a BI expert with an online DBA in BI from Marymount University.