5 Tips For Enhancing Your Risk Management
Business Solutions Enterprise risk management is a hot topic these days, but knowing how to implement it can be daunting. Here are five things to look for.
From financial crisis to natural disasters, cyber threats to unpredictable emerging markets, board directors and senior business leaders throughout the world have come to rely on risk management capabilities to protect their organization’s assets and reputation.
As such, enterprise risk management (ERM) has gained significant traction in boardrooms across the globe. ERM allows organizations to take a look at a range of risks across the organization and evaluate them more effectively.
While research (Farrell and Gallagher, 2014) supports that organizations with highly-developed ERM capabilities experienced a 25 percent increase in firm value, uncertainties about implementing such a program may cause some executives to pause. Here are five simple steps to cut your ERM anxiety:
1. Determine what value your organization will gain from ERM
Each company is different. For some, value from ERM will be seen in increased market share while others might be seeking a greater social impact.
2. Identify what’s you’re already doing right
Organizations might be surprised to learn that practices they already have in place could be integral to developing an ERM program. Additionally, operation managers already might be conducting their own version of a risk assessment. Information already collected will give organizations an advantage when embarking on their ERM journey.
3. Find a champion.
Without support from leadership, ERM is futile. A risk management champion should be an executive who has access to the senior most executives in the organization. This sponsorship will help facilitate the exchange of information up, down and across the organization.
4. Adapt processes to your needs
The risk management process needs to be flexible, able to adapt to different operation managers. Risk practitioners have a responsibility to foster a risk-aware culture and tailor communications to each different business area. Speaking the language of each operation manager will lead to more clarity on how an ERM effort can benefit their work.
5. Strive for continuous improvement
A risk management program is never done. New scenarios, products and, even, advancements in technology, make it a priority for organizations to constantly review their ERM programs and identify areas for improvement.
Risk management — if done right — requires time commitments from operational leaders, resources and funding that would be impossible to acquire without support from senior executives. With everyone onboard and the risk management culture reinforced by leadership, this core business function has the power to unlock doors to understanding potential obstacles while paving the way for strategic initiatives to succeed.