Every business has risks – some face small ones, while the others face bigger ones. Risks can come from various sources like project failures, accidents, financial market uncertainties, legal liabilities, credit risks, attacks, or any other uncertain or unpredictable events. We know that risks will come, so better than cribbing, is managing them the right way.
Risk management is the identification, assessment, and prioritization of risks, followed by implementation of resources to minimize and control the probability of any unfortunate events mentioned above. So, the main objective of risk management is to assure that uncertainty does not avert the endeavour from the business goals. Such management of risk across an organization can improve the organization’s ability to accept the right amount of risk to capture strategic opportunities.
Just like risk management, there is another methodology that works on the same principles to serve the same goals; and that is Six Sigma. Both risk management and Six Sigma rely on business processes and data integrity, and deal with risks and uncertainty to deliver value. However, while risk management approaches risk and uncertainty from a financial reporting viewpoint, Six Sigma does the same from an operations and production viewpoint. Also, Six Sigma determines whether a process is improving over time or not, which can help to measure improvements in risk management processes. The structure and statistical methods of Six Sigma can enhance the effectiveness and implementation of risk management in terms of employee expertise, implementation tools, and value creation. This is why it is very beneficial to incorporate both Six Sigma and risk management together within an organization for ultimate results. In fact, risk management is made of certain important elements, each of which can b supported by the methods and tools of Six Sigma, which we will learn below.
The behaviour and attributes of all the workers within an organization, along with their view of their level of responsibility, and commitment to development, all have an effect on the conformity to risk management. Using Six Sigma change management tools can help in creating a positive working culture within the organization by looking on process improvement in an optimistic manner.
Employees are generally rewarded for their contribution toward financial success of their business segment, in whatever way it may be. However, their actions may also have an adverse effect on the entire organization. Six Sigma tools along with change management can shift the focus to Voice of Customer and Voice of Process, which can bring several opportunities for the organization to increase its value through top-line growth.
Six Sigma can significantly assist leadership in managing the identification of risks by providing an insight into the sources of potential failure events, and highlighting constraints that restrict the organization’s ability to meet the demand. Also, various opportunities can be determined to gather metrics that service as leading and lagging indicators. Furthermore, by applying Lean principles, processes can b streamlined to eliminate waste and inefficiencies.
Conducting a risk assessment can help evaluate the degree of risks hat any potential events may have on an organization’s ability to achieve its goals. Six Sigma tools like cause-and-effect matrix, risk matrix, and failure mode and effects analysis can be used to convert qualitative approaches to quantitative methods.
After the processes have been improved, the process owner is responsible to constantly monitor the outputs and inputs to ensure that the process doesn’t return to its formal state. Six Sigma combines various process control systems into a single framework so that process owners can constantly monitor and report the inputs, outputs, and process metrics that more accurately reflect the organization’s performance.
While Six Sigma is built in a way that it can easily be deployed for risk management, one important aspect here is the presence of certified Six Sigma professionals. One can avoid risks all together when he knows exactly what to do, and this is what Six Sigma professionals are experts in. If you want to stand in such a position, make sure you take up a course of Six Sigma Certification in India, provided by expert authorities like TQMI.