In business, risk is necessary. Risk is inherent in all of a company’s efforts to execute and to meet its goals. The amount of risk a company takes on determines how flexible it can be; how easily it can meet a particular growth target; and which measured, transparent, and calculated approach it should use to get to that target. So, in effect, an organization’s tolerance—or appetite—for risk determines how far it’s able to go based on market conditions and the external environment.
Risk management is not about eliminating risk. The purpose is to understand how much risk the company is facing and how it can reduce that risk to an acceptable threshold. Some businesses are turning to data analytics technologies for new insights into where they face risks and what they can do to mitigate those that exceed their basic tolerance.
Risk Analytics for Growth
Most companies that deploy risk analytics use the technology to support their growth objectives. They evaluate the degree to which they should be willing to assume more risk in exchange for the prospect of higher returns.