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Risks can be complicated to identify, and it is challenging for companies to prepare and manage them appropriately. Therefore, if a company is being hit by consequences for which it had not planned, money, time, and reputation are at stake (Mind Tools Content Team, 2016). Risk analysis is a necessary process that helps identify potential issues that can undermine key business initiatives or projects. Companies that fail to perform risk analysis effectively put themselves in danger of serious problems that may lead to organizational failure.
An example of a company failing to identify and manage risk is the Wells Fargo scandal associated with inappropriate sales practices. Millions of customer accounts were set without their consent, which led to overdraft charges and additional fees. The failure of the company to manage risk is illustrated in such problems as the negligence of the CEO, the incentivization of employees by unrealistic sales quotas, and the absence of risk assessment issues such as internal audits and governance oversight.
For instance, the CEO should have known that such large-scale activities were going unnoticed by the company. In addition, the company should have conducted regular audits to determine whether there were any processes that hindered the effectiveness of organizational processes ( 6 basic steps to develop a project risk management plan, n.d.). When Wells Fargo created a program for sales incentives, the management should have been aware that the goals it set were unrealistic (Minsky, 2016). Besides, there were no prevention activities to protect against the manipulation of customer accounts, even though the management should have been proactive in engaging in activities of risk monitoring that would have identified the emergence of accounts created without customers knowing.
References
Mind Tools Content Team. (2016). Risk analysis and risk management: Evaluating and managing risks.
Minsky, S. (2016). The Wells Fargo scandal is a failure in risk management.
6 basic steps to develop a project risk management plan. (n.d.).
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