Six Sigma Risk Management Strategies that Organizations Can Adopt
Enterprise risk administration is the pillar of all risk management strategies that firms employ these days and the tools of Six Sigma risk management support it very well. Managing uncertainty is one of the key roles of an organization and following are the main pillars.
The top leadership and the vision, strategies, and other tactics that are put in place by businesses will determine the behavior of employees in one way or another. The culture determines the manner in which an organization’s employees perceive risks. These could have a huge impact on management of compliance risks among the employees.
Setting of objectives: It is the strategic level of a business that formulates the goals which the business has and translates them to granular objectives at a lower level such as the operational level of the business. Some years back, these set of objectives were mainly financial and were just concerned with how the firm could maximize its revenues. However, this has changed as a trend that values the customer, regulator, and that of the business regulator is emerging hence the need to embrace them.
Setting operational objectives: The operations of a firm should be run efficiently. When there is a lot of waste occurring downstream in the activities of the organization, it makes it very hard for the firm to achieve its goals. There are normally some indicators which an organization can use to determine how it is performing in relation to its competitors. Some employees in a few Six Sigma levels are tasked with collecting accurate statistics to enable them achieve their goals.
Reporting objectives: There have been many firms that have failed terribly in both internal and external reporting. This is a clear indication that there are some breakdowns in the enterprise management system. This poses huge risks for the firm in many ways.
Event identification: There are many six sigma tools which could help the management of a business enterprise in proper event identification. The tools that are available enables Six Sigma professionals to point out the probable source of failures, to assist in gathering the metrics which serve as leading and lagging indicators, and also to assist in the application of statistical techniques which establishes threshold triggers and establish escalation. The quality of service and deficiencies are also identified by the administration.
Risk Assessment: Carrying out an assessment about uncertainties provides an opportunity for the business to understand its strategic and operational objectives and map out ways to enable them achieve these objectives. The danger matrix, cause and effect matrix, and the failure mode matrix are some of the uncertainty assessment tools which can be used to take care of uncertainties.
Response to risk: After the uncertainty has been worked out and mapped, there is a huge need to respond to it. Organizations develop their uncertainty tolerance levels which are normally different from one organization to another. Six Sigma risk management provides proper control activities to be put to place to ensure that the reduced risk is not only mitigated, but shared or fully accepted by the organization.