Leveraging enterprise risk management methodology can promote business continuity and enable your organization to operate within its risk appetite.
However, implementing the ERM framework can be challenging, especially if your organization relies on manual entity management processes and a bottom-up risk mitigation approach.
The good news is you can facilitate a seamless transition to the more holistic, top-down ERM philosophy by utilizing a few proven tools and strategies. If your organization wants to improve its risk management capabilities and promote continuity, you should:
Gauge Your Risk Appetite
The first step on your enterprise risk management journey involves gauging your appetite for risk. Your risk appetite is simply the minimum amount of risk your organization is willing to tolerate.
As you’re no doubt well aware, no business endeavor is entirely risk-free. However, more conservative organizations tend to have a low risk appetite, whereas more aggressive entities are willing to take on high amounts of risk in hopes of achieving a big payoff.
After you set your risk threshold, you’ll need to address all risk factors and potentially threatening events that lie above it. You can manage this risk by avoiding it, distributing it (obtaining insurance or taking on a partner), or reducing it.
If your C-suite sets a lofty goal outside your risk appetite, you have a fourth option for dealing with risk: to embrace it as the “cost of doing business.”
Set Objectives in Line with Your Risk Tolerance
Traditionally, individual departments or business units have been tasked with managing risk.
Unfortunately, this compartmentalized approach can cause misalignment between an organization’s goals and its risk management strategy. Since the enterprise risk management framework uses a top-down approach, the goal-setters are also the ones establishing the company’s risk appetite.
Once you and the board have defined your risk appetite, you can set specific objectives that fall within your tolerance.
When your objectives and risk tolerances align, you can set realistic growth expectations and avoid exposing the business to unnecessary threats. By the same token, if you decide to pursue a lofty growth goal, you can better assess and proactively address the risks that will arise as a side effect of that objective.
Assess and Identify Risk Events
Under the enterprise risk management framework, you must assess and identify specific risk events. Risk events are classified using a pair of variables: their likelihood of occurring and their potential impact on your business.
Events with a low likelihood of occurring and a minimal potential impact on your business are of little concern. Events that have a high chance of occurring and could pose a risk to business continuity, on the other hand, must always be on your radar.
After you’ve identified and classified various risk events, you can begin developing a response strategy for the most concerning incidents. This will ensure that you have contingencies in place should a high-risk event occur.
Collaborate and Communicate with Your Team
Sharing information with your team serves two important purposes.
First, being open and transparent with department leaders will help you optimize buy-in. If you want your ERM strategy to succeed, you need everyone on board.
Additionally, communicating with your team allows you to proactively prevent potentially cataclysmic risk events. You can also share your response plans should an external risk factor threaten the business. Collaborating with your team early and often will maximize the efficacy of your ERM plan and increase everyone’s preparedness.
Shift Away from Manual Processes
Does your organization still rely on manual entity management processes and antiquated software? If so, you’re long overdue for an upgrade.
It’s virtually impossible to implement a viable enterprise risk management strategy using time-consuming manual processes or disjointed technology. Such processes and solutions impede productivity, information sharing, and transparency, all of which are central to ERM.
You should therefore systematically identify potential information bottlenecks and software inadequacies as part of your enterprise risk management planning process. Determine what processes and technologies are holding you back, then sunset them.
Embrace Modern Technology Solutions
You'll need to find a viable replacement as part of your efforts to phase out obsolete software.
When searching for a replacement, you should identify a centralized solution that will serve as a single source of truth for multiple departments and teams. Unifying your business data into a single platform can streamline communication and collaboration across the entire organization.
Make sure you implement a solution that provides powerful automation tools. Automating workflows will reduce the likelihood of human errors and protect your business from undue risks. Leveraging automation will also enable you to implement redundant protections to prevent governance and compliance issues.
Gather Feedback and Adapt
Your work isn’t done once your solutions and enterprise risk management strategy are in place. You must continuously gather feedback about your strategy, analyze its efficacy, and adapt.
Risk management is an ongoing process that must always receive adequate attention and resources. Otherwise, you may never see business continuity threats coming until they’ve already left their mark on your organization.
In addition to gathering information and conducting an in-house analysis of your ERM strategy, you should also consider scheduling third-party audits. Outsourcing the auditing process will provide an objective perspective into your risk management efforts and yield new insights that you can apply to your ERM strategy.
Connect with Athennian
With the modern business world being what it is, it’s a simple fact that the success of your enterprise risk management strategy hinges on the quality of your technology.
If you want to move closer to organizational objectives while operating within your risk appetite, you need a solution that provides real-time insights into the state of your business.
Athennian’s centralized entity, subsidiary, and business data management solution is the ideal tool for optimizing ERM. Our platform includes sophisticated automation software and an intuitive interface that your team can use to leverage organizational data to achieve strategic goals.
To learn more about Athennian and the resources we offer, schedule a customized demo today.