Hiring the right risk management consultant for your organization is an important decision — and it shouldn’t be done lightly. You could choose to assess and manage risks in-house. However, you could put your organization at risk without an intimate understanding of best practices designed to catch problems and pitfalls.
On the other hand, hiring the wrong consultant can be just as disastrous. They are taking on an important role, and you need to be sure they know what they’re doing.
So how do you know the person or company you bring in will be a good fit and has the best interests of your company at heart?
You familiarize yourself with the pros and cons of hiring a consultant and the best practices of risk management. Then, you’ll have a better idea of what to look out for when comparing consultants. Keep reading, and we’ll dive into the pros and cons of hiring a consultant and show you how to avoid the most common pitfalls.
What is Risk Management Consulting?
Risk consultants help companies identify, assess, and manage risks implicit in a firm's operations. These risks can relate to any area within the organization — operations, technology, compliance, etc.
Here is a short list of things a risk consultant might do:
- Create risk policies and procedures to address key risks associated with their products, services, and other activities
- Assess business processes to identify any risks
- Help with risk analysis and quantification
- Work with managers to develop and implement risk management strategies
- Partner with the HR team in recruitment and training of new employees
- Help with internal audits and make recommendations
- Give expert solutions for risk-related questions and concerns
- Mentor junior staff members in their assigned job responsibilities
- Stay up-to-date with the latest developments and best practices in the risk management field
Pros of Risk Management Consulting
Pro #1: Implement, Fix or Enhance Existing Processes
When you hire a risk management consultant, you will see an improvement in operational efficiency and effectiveness. They help you streamline core processes with a more effective response.
Risk management consultants also make sure you stay in compliance. They look at what you are doing, identify areas for improvement, and develop solutions — allowing you to continue to deliver high-quality services.
It's also common for new companies — and even established ones — to not know the full range of the industry best practice. The right consulting firm knows what your company needs to get a competitive edge. When you work with a consulting firm, you can leverage their knowledge. They know a great deal about your industry, and you can learn from them.
Pro #2: Add New Opportunities
Risk management consultants become trusted partners with a keen eye for thriving opportunities. They can see ways to improve your company that you haven't thought of yet. Because of their expertise, they know how to give you a competitive edge.
- They know who you are competing against.
- They will learn your strengths and show you how to harness them.
You'll be able to use their experience and insights to find new ways to grow your firm.
Pro #3: Reduce Technology Overhead
Hiring an outsourced team is one of the best ways to reduce your company's technology footprint. With the rapid advancements in technology, it is expensive to keep up. Outsourcing keeps those costs down.
New technology can also be frustrating to adopt. A consultant will serve as a guide to help you avoid downtime and difficulties while your company puts new technologies in place.
Cons of Risk Management Consulting
Con #1: Anyone Can Claim to Be a Risk Management Consultant
For the most part, the consulting field lacks regulation — except consultants that require licensing such as CPA, law, or medical. Anyone can brand themselves as a consultant. Therefore, performance is generally mixed. You might have some great consultants and some terrible ones.
It’s hard to know what you are getting when you hire a consultant, even if they have impressive references and present interesting proposals. Until you've seen them perform, it's a gamble.
Con #2: They Don’t Deliver on Their Promises
It's not uncommon for poor consultants to commit to unrealistic goals. They may promise to do an unrealistically thorough job, or agree to do it quicker than possible. They make promises to get the project, but can't deliver on them.
When a consultant doesn't fulfill their promises, it leaves your company at higher risk.
Con #3: The Quality of Their Work is Inconsistent
Inconsistencies in quality may be an issue, particularly with bigger firms that may need to rotate their resources.
For example, when you change out software or update your workflow processes, keeping track of all the changes gets confusing — and that can result in things slipping through the cracks.
Con #4: They Don’t Have Your Companies’ Best Interests at Heart
Consultants may want to push solutions that benefit them financially but aren't in your company's best interest. Like the stereotypical mechanic, consultants could recommend services that you don't need, or find reasons to extend their time with your company to inflate their fees.
Con #5: They Don’t Fit Your Company Culture
You should set the same expectations for consultants as you do for your full-time employees, especially in terms of cultural fit. If your cultural views do not align, the relationship may not be successful.
Receive their proposal in person. This allows you the opportunity to gauge the consultant's experience and expertise and determine if they fit well in your company's culture.
The good thing about these risks, though— they can be managed with a contract. Sit down with your consultant and set clear expectations with them. It's best to define their roles and responsibilities clearly— do not hire them solely on their proposal!
How to Avoid the Most Common Pitfalls When Hiring a Risk Management Consultant
Keep the above pros and cons in mind when comparing consultants. This gives you an excellent starting point to avoid the most common pitfalls — but it's not the only thing you should do.
We understand just how important it is to hire a consultant to help you spot potential weaknesses and blind spots within your organization. That's why we put together a free self-assessment to help you identify gaps in your risk management process.
“When you work with them, they don’t simply give you a cookie-cutter approach. They step into your company and explore your processes. They invest wholeheartedly in the process and strategize with a clear vision that is operationally sound and effectively designed to reduce your risk to an acceptable level.” - Clem M., CEO, CGM Trading, LLC
Answer these seven multiple-choice questions. On completion, you'll have an opportunity to schedule a free consultation to discuss your results live.