Risks are becoming more and more complex for organizations to manage without implementing Enterprise Risk Management (ERM) solutions. This only increases the value of risk management in all organizations and often gains the spotlight as the topic of discussion in many conferences. Recently, the Spring 2017 NC State ERM Roundtable Summit took place where people discussed the ways in which enterprise risk management can be used to handle risks in the organization.
The members of the summit discussed ways in which organizations can integrate strategy and enterprise risk management to give the best techniques that can be implemented company-wide. There is a connection between risks and the company’s business objectives which need to be highlighted with the help of enterprise risk management. It can help with improving the company’s image once all the ERM processes are in line and functional.
To be able to handle risks successfully, companies also need to manage their expectations and scale the enterprise risk management system in a timely manner. All committees need to be more strategy-oriented. Organizations also need to take into account all the existing risk management strategies they follow.
10 Best Practices to Handle Risks in Enterprises
Integration between strategy and ERM
All successful businesses function based on the strategies they implement. These strategies are created to help companies achieve their business objectives. This is why implementing enterprise risk management in this stage is crucial. Once ERM and business strategies are integrated, organizations can learn how to manage risk from the beginning itself.
Emphasize on the Impact of Risk on Business Objectives
An enterprise risk management system will become more integral to an organization once the relationship between risk and business objectives has been understood. 59% of business executives agreed that their operational efficiencies and business objectives were affected due to a critical risk event.
Once the board of directors and upper management employees understand how risks can prevent the company from achieving its business goals, they will accept risk management processes early on.
Help the Business Look Good
Only 28% of organizations are in the process of making a reputation risk process for their company. An enterprise risk management solution can help companies increase their value to their stakeholders. This is done by successfully promoting good business practices and creating a risk culture across the company. This way ERM becomes a valuable resource to the company’s success.
Create a Stakeholder Network
Organizations cannot always create a separate team to handle enterprise risk management. This means accountability of the processes need to be given to stakeholders within the company itself. Companies need to assign different roles to their employees in terms of risk management both enterprise-wide and on a project basis.
Advance the ERM Process at a Steady Pace
Once enterprise risk management is implemented in a company, business owners or other employees might want to make some changes to improve its efficiency. This has to be scaled at a steady pace so as to not have a negative impact on the company. Sometimes when organizations try to implement too many changes too soon, they experience ‘risk fatigue’ because the changes implemented are not in line with the operations in the company.
Make the Management Level Committee for Risks More Strategic
Change the focus of the risk committee at the management level to make it more strategy-oriented. The main focus should be on strategic risks and other emerging risks to the company instead of focusing on risks that already exist. This helps companies plan risk responses preemptively.
Map Out the Existing Assurance Activities in the Organization
When implementing a risk management system, members of the organization need to check what assurance activities they are already doing. This will help them realize the current steps the company is taking to manage risks and how ERM can help with that. The other aspects of mapping out all the existing assurance activities are:
- Eliminating duplicate functions
- Reducing the cost of risk management
- Improvement in decision making
Focus On More Than Just Known Risks
Looking for risks that have occurred fairly regularly and coming up with strategies to manage them is easy and comfortable for employees. This is why they do not end up looking for more complex and ‘unknown’ risks because it can be difficult. These unpredictable events also need to be considered because they could have a high impact on the organizations.
Create Playbooks for Top Risks
Organizations should create a comprehensive plan, or a playbook, that will have all the strategies of dealing with the top risks to the company. This playbook will have a key set of actions to work on to get the desired outcome. The playbook should ideally include:
- Definition of objectives
- Identifying primary and secondary points of contact for taking action
- Company protocols specifications in case of emergencies
- Updated information
Use Top Table Exercises
Once companies have created their playbook they need to make sure the strategies they have made work as intended. This can be done best by creating crises and managing the risks that come with it. This will help in creating responsibility and awareness based on the roles in the risk management process.
Doing run-throughs will make sure that the organization is as prepared as possible when a crisis actually hits. This also helps in checking whether or not the risk responses work as effectively as they are supposed to. All backup sites and operating systems get periodically checked as well.
Final Thoughts
These techniques can be used in an organization to successfully implement and use an enterprise risk management system. They help in making sure that all departments work smoothly together when it comes to preventing and mitigating risks beforehand. The only way companies can execute an enterprise-wide risk management platform is by training all employees.
There are various IT Security and Governance training programs available that will help employees learn effective risk management techniques and implementation processes. Risk management is gaining more importance everyday and business leaders and the board of directors have realized the value of an effective risk management platform to the company’s success.
Some of the popular IT Security and Governance Courses that individuals and enterprise teams can take up are:
