No two crises are alike. Following any market disruption, financial services companies should first evaluate emerging risks and the business’s exposure to them. A proper assessment should include the pace at which new concerns are emerging and new areas of instability like changes in liquidity and interest rates. In addition to the impact on internal business operations, a company should also know the broad implications that risks will have on the industry, economy and society.

Internally, and preceding any market impact, businesses should also analyze their preparedness to absorb and tolerate risk defined by economic factors, consumer confidence and any critical balance sheet gaps. By assessing the company’s current strategy and controls in-place, risk managers can evaluate exposure to systemic risks and other worse-case scenario events. The business can then model a proactive and protectionary strategy for responding to those threats.

Finally, a thorough risk evaluation analyzes the potential for outlying risk factors. Standard assessments identify predictable risks, but a destabilizing event could cause a ripple effect, ultimately catalyzing threats beyond the initial event. Unforeseen events are the biggest hazard to a business. To avoid risk, cast a wide net to detect areas of instability even before they emerge.

All businesses have some appetite for risk. Risk tolerance will vary from business to business and ebb and flow with internal and external factors. Once a company has an acute understanding of the market dislocation and associated risks, the next step is to align risk tolerance with the company’s business objectives. Company culture and values, customer behaviors and long-term growth goals should all impact the company’s risk aversion and acceptance in a changing economic market. In addition to internal alignment, the company should also determine its risk appetite related to global trends and macroeconomic events as well as how competition is adjusting to emerging risks.

Likely, a new risk environment will require companies to reassess current business goals. Historically, risk assessments focus on long-term business objectives, but following a black swan event or other massive shock to the economy, risk management teams must take a closer look at short-term objectives. By looking at the near-term risk appetite, companies can react quickly to changing market dynamics.