It’s been a year of belt tightening. Plant closings, layoffs, spending freezes, and reorganizations — all tactical levers for keeping costs down in order to survive a stubborn recession. But these short-term strategies are ways to keep companies afloat, and they are not necessarily sustainable given new pressures in the form of inflation, green agendas, and more and more regulations.

Suddenly, manufacturers are feeling a greater need to gain control across, and outside of, the organization. In other words, they need new ways to manage risk.

I’ve heard the term ‘risk management’ popping into more and more conversations lately. But what does it really mean? Loosely defined, it’s a balance between risk and related opportunities, but it spans many facets of the organization, from corporate reputation to operations to partnerships, and it includes financial reporting, regulatory compliance, quality control, production, new initiatives like green, and market dynamics. So the words “risk management” really mean something different to each industry, and to each company.

Manufacturers, however, need to take a good look at the banking and financial industry, which, following a bout of bad loans and bad decisions, has put greater emphasis on the role of the chief risk officer (CRO). This individual is responsible for policing possible problems. And, typically, he or she heads a risk department that keeps tabs on activities throughout the company, because risk management is a cross-functional effort.

The creation of a ‘risk department’ may seem a bit over-the-top for most manufacturers, but given the global landscape, the product quality problems that can pop up (from peanut butter to toys), and a growing dependence upon partners — a potential weak link in the supply chain — manufacturers can’t afford not to establish an office of risk management that not only tracks risks through the use of technology, but also enforces company-wide best practices and policies.

Manufacturers can’t wait until a crisis hits. And leaving it risk management to each department manager will result in a mix of technologies from a variety of vendors claiming they can remove risk. A hodge-podge of new technologies implemented to address one function, be it contract management or quality assurance, may only exacerbate the problem. There needs to be a cohesive, standards-based approach to this business problem.

It’s time for a unified, top-down approach to risk management. It’s time to appoint a CRO. Do you agree?