The economic climate in which we currently find ourselves in continually forces healthcare organisations to evaluate and re-evaluate their operational efficiency. Ensuring they are not making a loss, and ideally maximising profits, has long since been the main priority of business objectives. There are very few organisations who can survive on a long-term basis without, at the very least, meeting their expenditures.
One question remains, however: how much risk should, or can, they take in order to achieve this basic objective?
The tolerance for risk varies considerably across the cultures of different organisations, but it may have reached a stage where there is an assumption of risk that comes at the expense of stakeholders. There is an open question as to whether or not a more proactive approach to risk management could avert more medical error in healthcare organisations. And a further question as to the extent to which stakeholders are aware of the risks that could be averted by more proactive risk management.
Risk management is generally a hybrid function which bridges several different disciplines in order to reduce the number of losses an organisation suffers. Risk management activities can take the form of proactive attempts to mitigate or prevent a loss, or they can be reactive responses to losses that have already occurred – essentially damage control.
The majority of healthcare organisations have a risk management system; however, the effect it has upon the organisation’s stakeholders varies depending on whether it is reactive or proactive, and the extent of the programme.
A proactive approach to risk management will often avoid expenses and losses that would otherwise be costly to both the company and its stakeholders.
The essential problem with risk management, however, is that it’s difficult to demonstrate its value in a quantifiable way, because the events and circumstances it has prevented never happened, and thus the extent of the damage they would have inflicted is not known. The healthcare industry is extremely focused on measurements and benchmarking.
Where risk management is concerned, this is extremely difficult to do, and it’s often difficult for both management and stakeholders to see the benefit of an extensive amount of risk management when the risks they are facing are so difficult to define.
There is an essential challenge inherent to risk management that requires healthcare organisations to find a measurable metric that can be used to efficiently and effectively demonstrate savings that can be made and losses than can be, or have been, averted.
The issue for stakeholders is that the elements of risk management that affect them most are the ones that are most difficult to quantify. Many organisations are reluctant to expend extensive resources, time and money in order to mitigate the risks of events that are very unlikely to happen. Yet it is these extremely unlikely risks that prove to be the most devastating when they do occur.
Stakeholders often have a limited say in the extent of risk management, and consequently can be totally blind-sided when things do go wrong. Alternatively, they can be heavily involved and, through a lack of understanding, resist a proactive approach and unwittingly be the cause of greater losses.
The upshot is that risk management is greatly beneficial to stakeholders, however, it is often out of their control, or something they find difficult to fully appreciate and, consequently, approve. As a result, it is often undervalued and underused, to the detriment of the healthcare industry.