Make Your Enterprise Risk Management Program and Integral Part of Your Strategic Management Process
Enterprise risk management (ERM) is often considered to be a broad and complex discipline that reaches into every major area of an organization. But, it doesn’t need to be this complex. In fact, the more the ERM processes are integrated within the existing processes, the more likely it will be successful. Companies have struggled for years with how to define ERM leading to multiple methodologies and approaches. Many ERM program implementations have resulted in limited practice, inability to achieve a sustainable, repeatable process, and minimal value. Yet in today’s economy with the globalization of business, rising expectations from stakeholders and constantly increasing changes in regulations, the corporate appetite and tolerance for risks, risk relationships and their potential, material impact is at an all-time high and the pace of change is increasing rapidly.
Effective Enterprise Risk Management Technology Facilitates:
- Understanding risks
- Prioritizing risks
- Measuring risks qualitatively
- Improving communication across all business units
- Driving Return on Investment (ROI)
- Instilling confidence among stakeholders and fully documenting the process with integrated workflow
Enterprise Risk Management Challenges
When attempting to implement ERM, many organizations seem to suffer from the following challenges:
- Limited universal understanding of risks and material impacts of risks
- Limited, if any, ability to visualize the ERM process, inputs and outputs, and reporting for all relevant stakeholders including senior executives and board of directors
- Inability to effectively communicate and articulate key risks (to boards, executives and ratings agencies)
- Limited ability to transition from cost/benefit to risk/reward
- Tools do not facilitate a demonstrable, sustainable process without an adequate audit trail
- No central repository for risk management information and activity
- Limited ability to incorporate key risk information (both upside and downside) into strategic planning
The Confusion Between Enterprise Risk Management and Governance Risk & Compliance (GRC)
Enterprise Risk Management
- Risk Adjusted Return on Capital (RAROC)
- Corporate Debt Ratings
Strategic Planning
- Risk Categorization
- Risk Triggers
- Exposures and Consequences
- Risk Mitigations
- Accountabilities
- Integrated, Comprehensive Data Management
Corporate Performance Management
- Business Intelligence
- Dashboards & Reporting
- Analysis
- Scorecards
- Key Risk Indicators (KRIs)
- Key Performance Indicators (KPIs)
Corporate Governance & Strategy
- Risk Culture Development
- Risk Transparency
- Risk Tolerance Level Analysis
- Risk Business Process
Business Risk Management
Project Risk Management
Presenting Risk Information to Your Board of Directors or Senior Executives?
Spreadsheets are a Risk for Risk Management
All companies face risks. The ones who seem to succeed year over year and rebound most quickly from a major disruption are those that have embedded and formalized processes to not only identify risks, but also to mitigate those risks.
Standard & Poor’s Plans to Integrate ERM into the Measurement of Management’s Effectiveness
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