Introduction
Risk governance and risk management allow businesses to identify strengths, limitations, threats, and opportunities of their current and future projects. Examining how risk governance can influence project outcomes and success is a useful task that could potentially strengthen the competitive advantage and ensure that a company reaches the objectives it has set earlier. Although the effects of risk governance can depend on the nature of the organization and the quality of implemented projects, it is expected that there is a positive correlation between effective risk management and the overall success of projects.
Literature Review
While it has been suggested that top-down management of risks can limit innovation and the flow of new ideas, Kaplan and Mikes (2016) argued that risk governance could act as a “revealing hand” (p. 8) for the identification, assessment, and mitigation of potential hazards in a cost-effective and sufficient manner. The researchers concluded that risk management and governance could add value to the business by enabling the management to take risks and proceed with ambitious projects. According to Viscelli, Beasley, and Hermanson (2016), boards of directors in organizations have been raising their expectations of risk governance in recent years. In order to adopt unified approaches, more and more companies started using enterprise risk management (ERM) as a unique method that mitigates organizational risks. Because research on ERM is currently at its infancy stage, as mentioned by Bromiley et al. (2015), it may be beneficial to study the connections between risk governance and ERM. Stein and Wiedemann (2016) also explored the benefits of risk governance with regards to conceptualization and tasks within organizations; researchers emphasized the importance of risk governance when bridging the gap between risk management and long-term organizational goals.
Discussion
The brief examination of available research suggests that there is a strong positive relationship between the success of projects and effective risk governance. As the costs of failed projects go up, with approximately $682 billion wasted on underperforming projects annually (EY 2015), companies become more aware of the benefits of planning and risk mitigation for protecting their financial security and preserving their reputation. Research on the influence of risk governance on the success of organizational projects is limited; therefore, it can be beneficial to design an experiment that will test the benefits of risk governance in a real corporate setting.
For example, two groups of employees that work in the same company can participate in the research. One group will be assigned a project and asked to develop a risk governance plan for ensuring success; the second group will not use risk governance. Customers will become the target audience for group projects; in the end, clients will be asked to complete a survey to determine which project was more successful. Then, the groups’ efforts will be analyzed for identifying whether risk governance played a role in the success of the project winner.
Conclusion
To conclude, risk governance presents massive opportunities for companies that want to adapt to the changing business environment (IRGC 2017). It offers a set of tools for minimizing the negative consequences associated with corporate risks (financial, reputational, etc.) and allowing companies to focus on more important projects such as capturing a new segment of customers or overcoming competition. Nevertheless, further research on this topic is needed to evaluate the specific effects of risk governance on organizational success.
Reference List
Bromiley, P, McShane, M, Nair, A & Rustambekov, E 2015, ‘Enterprise risk management: review, critique, and research directions’, Long Range Planning, vol. 48, no. 4, pp. 265-276.
EY 2015, Predicting project risks improves success. Web.
IRGC 2017, What is risk governance? Web.
Kaplan, R & Mikes, 2016, ‘Risk management – the revealing hand’, Journal of Applied Corporate Finance, vol. 28, no. 1, pp. 8-18.
Stein, V & Wiedemann, 2016, ‘Risk governance: conceptualization, tasks, and research agenda’, Journal of Business Economics, vol. 86, no. 8, pp. 813-836.
Viscelli, T, Beasley, M & Hermanson, D 2016, ‘Research insights about risk governance’, SAGE Open, vol. 6, no. 4, pp. 1-17.