12.10: Risk Management Across Different Sectors

Risk management helps organizations anticipate and address potential threats and uncertainties in many areas.

Project Management

Risk management is important in project management, where uncertainties and potential risks can significantly impact project success. By incorporating risk management into project planning and execution, project managers can identify potential obstacles, allocate resources effectively, and implement contingency plans to minimize project delays and cost overruns. Almost all business activities can be classified as business projects. For example, developing a new product, implementing a new process, upgrading to a new computer system can all be considered business projects. Most likely, you will be part of one of these types of project teams in the future.

Creating a comprehensive project plan is crucial for ensuring the smooth execution and successful completion of any project. A well-structured plan serves as a strategic guide, detailing the tasks, timelines, required resources, and project objectives necessary to meet the desired outcomes. For example, consider a large organization undertaking the implementation of an enterprise resource planning (ERP) system.

To manage potential project risks effectively, the organization could take several key actions:

• First, it would identify potential risks such as data migration challenges, gaps in employee training, and potential system downtimes that could disrupt operations.
• Next, the organization would implement strategies to mitigate these risks, including conducting pilot tests, selecting a vendor with a strong track record in similar projects, and ensuring thorough and ongoing staff training before the full system rollout. Additionally, the organization would establish a clear project scope and deliverables to avoid scope creep, ensure that all stakeholders are aligned on expectations, and set realistic milestones.
• Third, the organization would implement strong change management practices to address any resistance to new technology and processes, providing employees with clear communication and support throughout the transition. Furthermore, it would allocate a contingency budget to cover any unforeseen issues that may arise during the project.
• Finally, the organization would closely monitor progress through regular project team meetings, maintain open communication about project goals and timelines, and establish feedback loops to address emerging issues proactively, ensuring that the project stays on track and any risks are promptly managed.

Project management tools can help reduce risks. Tools like Trello, Asana, Monday.com and Microsoft Project help organize tasks, track progress, and manage resources. Gantt charts and PERT charts are visual timelines that show project progress against deadlines. While both visualize timelines, Gantt charts are more explicit about specific dates, whereas PERT charts emphasize task relationships and sequences without necessarily focusing on calendar-specific details. Many project managers use both tools together for comprehensive project planning and execution. RiskWatch is a risk management software used by many project managers to track and analyze risks.

Information Technology

Information technology (IT) is another sector where risk management is of utmost importance. With the increasing reliance on digital systems and the rise of cyberthreats, organizations must implement robust risk management practices to protect sensitive data, maintain system integrity, and ensure business continuity. Cybersecurity risks, such as data breaches and malware attacks, can have severe consequences, including financial losses and reputational damage.

Information risk management is defined as the policies, procedures, and technology an organization adopts to reduce the threats, vulnerabilities, and consequences that could arise if data is not protected.^[1]

To continuously manage information risk, a business should do the following:^[2]

• Monitor security performance. Software can help a business monitor for emerging vulnerabilities, such as identifying and alerting the business to misconfigured software, unpatched systems, open ports, and anomalies in user behaviour. It also ranks areas of disproportionate risk, allowing security teams to prioritize where to allocate resources.
• Measure security effectiveness. Software can provide data-driven views of how effective the business’s information security efforts are and help maintain alignment with compliance requirements. Findings are presented as a numerical score, making it easy to convey security risks and the organization’s cyber readiness in terms that all stakeholders can understand.
• Manage third-party risks. Third-party vendors and partners are an integral part of modern business operations, but they also introduce significant risks. Mitigate supply chain risk by measuring, verifying, and continuously monitoring vendors’ security measures — without relying on manual, subjective, point-in-time assessments. If a vendor’s security performance drops below a pre-agreed risk threshold, the business will receive automatic alerts and insights that can be shared with your vendors, making third-party risk management a more collaborative process.

Finance

In the financial sector, risk management is crucial for banks, insurance companies, and investment firms. These institutions face a wide range of risks, including credit risk, market risk, operational risk, and liquidity risk. Effective risk management practices in the financial industry help ensure stability and prevent financial crises. Canadian financial institutions face an increasingly complex regulatory web as regulators in Canada and globally impose greater pressures to assess, monitor and mitigate regulatory and operational risks. Also, today’s financial institutions need to keep up with new regulations, deal with new issues, including those created by remote work and emerging technologies, and manage the human resources and technological requirements to get the job done. The speed of change is rapid, and the demands are increasing.^[3]

Risk management in the financial world is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions. Essentially, risk management occurs when an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment.

A few of the alternatives financial institutions might choose to mitigate the risk include:

• Credit risk. Establish strict loan approval criteria and conduct creditworthiness evaluations.
• Market risk. Hedge against fluctuations using derivatives and portfolio diversification.
• Operational risk. Implement strong internal controls and compliance programs.

JPMorgan Chase uses advanced data analytics and stress-testing models to manage its credit and market risk exposures. It also employs a robust cybersecurity framework to protect against data breaches, integrating these efforts into its broader enterprise risk management strategy.^[4]

The financial industry’s reliance on technology, global markets, and complex financial instruments underscores the importance of a proactive and comprehensive approach to risk management.

Health Care

The healthcare industry relies heavily on risk management to ensure patient safety and quality of care. Health care organizations face risks related to medical errors, patient privacy breaches, and regulatory compliance. By implementing robust risk management strategies, providers can identify and mitigate potential risks, leading to improved patient outcomes and reduced legal liabilities.

Risks in health care include medication errors, patient safety incidents (e.g., falls, infections), data breaches involving patient records, and legal risks from malpractice claims. Strategies to reduce risks might include staff training, installing electronic health records with safety checks, and ensuring compliance with infection control protocols.

Some challenges experienced in the health care sector include balancing patient care with cost control, integrating new technologies without compromising security, and navigating evolving regulations and industry standards.

Risk management in healthcare requires a proactive and multidisciplinary approach, involving clinicians, administrators, and compliance experts to create a safe and efficient care environment.

Supply Chain Management

Supply chain management is yet another area where effective risk management is critical. Supply chains are vulnerable to various risks, such as disruptions in logistics, supplier failures, and natural disasters. By implementing risk management strategies, organizations can identify potential vulnerabilities, establish alternative supply sources, and develop contingency plans to minimize the impact of supply chain disruptions.

Here are a few examples of supply chain risks:

• Natural disasters: Earthquakes, hurricanes, or floods can damage infrastructure or halt production. In April 2024, a violent earthquake in Taiwan severely impacted semiconductor production, triggering widespread disruptions across global supply chains—particularly in the automotive and electronics industries—due to Taiwan’s key role in chip manufacturing.
• Global pandemics: The COVID-19 pandemic disrupted the supply chain globally as it caused widespread factory shutdowns. The directly impacted industries were electronics, automotive, and consumer goods. COVID-19 revealed numerous vulnerabilities in supply chains, from reliance on single-source suppliers to inadequate risk management practices for global disruptions. Many companies have since adapted by diversifying suppliers, investing in digital technologies for better supply chain visibility, and rethinking inventory strategies.
• Geopolitical risks: Trade wars, tariffs, and sanctions, like the U.S.-China trade war, can disrupt international supply chains, leading to delays, cost increases, and changes in supplier strategies.
• Cybersecurity risks: Cybersecurity breaches can disrupt the supply chain by paralyzing critical systems, halting production and logistics, and preventing the flow of goods and services across interconnected networks. The June 2025 cyberattack on United Natural Foods Inc. (UNFI), the primary distributor for Whole Foods Market forced UNFI to shut down its systems, halting deliveries to over 30,000 grocery stores across North America. This led to empty shelves, frozen supply chains, and manual workarounds, highlighting how a single cyberattack can paralyze a critical segment of the food supply chain.^[5]

Technological tools in supply chain relationship management help monitor and reduce risks. Some of these tools include:

• Supply chain mapping tools like RiskMethods and Resilience360 help companies map their entire supply chain to visualize risks.
• Predictive analytics software like Llamasoft and SAP Integrated Business Planning use AI and machine learning to forecast risks and optimize supply chain operations.
• Blockchain technology used by companies like IBM and Maersk improve transparency and reduce fraud risks in supply chains.

Media Attributions

“Operation, Operating room, Surgery image” by sasint, used under the Pixabay license.