Enterprise Risk Management
What is ERM?
Enterprise risk management give a systematic approach to managing risks throughout the whole company by identifying, assessing, understanding, acting on and communicating risk issues. There are five main benefits of enterprise risk management.
- It helps the management by helping business managers plan strategically, allocate resources more wisely and reform if needed and helps in constraining threats to the corporation.
- It increases efficiency by allowing the business to take only smart risks.
- It facilitates innovation because innovation requires risks.
- It fosters a supportive work environment for self-reliance because it serves like a tool for analyzing causes and consequences of difficult situations in a rational and systematic manner.
- It increases the credibility of the whole company by improving results and assures stakeholders that goals and deadlines will be met.
The thin line between a smart risk and bad risk is finding the balance between the risk’s impact and likelihood.
How to implement enterprise risk management?
There are three main steps to implementing ERM in your organization:
- Be clear on your goals and crucial stakeholders
- Identify, prioritize and act on uncertainties before making a decision on how to proceed
- Communicate and review uncertainties
The first step to risk management is becoming clear about your goals and the parties involved. The goals include expected outcomes and results. Then you must determine data about the important stakeholders such as who they are, how they might affect your targets and how to engage them.
The first thing in the second step is to get an overview of all the risks that your company might face. This enterprise risk management assessment can be done either by you or a designated team. Then you would need to undertake a probabilistic risk assessment (PRA), which is a method to evaluate, rank and prioritize risk in a systematic manner by generating a risk matrix. Once identified, the risks must be evaluated against two criteria:
The third sub-step is to take action on risks, which have been prioritized by the risk matrix.
The final step of enterprise risk management implementation is to monitor, review and communicate through risks. There are four main factors:
- Further action is required
- Appropriate controls are in place
- New uncertainties are emerging
- Changes to UNSECO’s strategic uncertainties require unit level action
The best practices for risk reviews are to use existing management/staff meetings, rather than creating mechanisms. The review and monitoring process for enterprise risk management has to take place on three levels:
- Monitoring, evaluation and reporting of adequacy and effectiveness of internal control
- Monitoring of the general risk profile of the company and eventual changes in uncertainties
- Monitoring of the progress of the implementation of enterprise risk management
How can we help?
We can design and create state-of-the art risk management reports. And after that, our professionals can maintain the enterprise risk management reports for your organization.
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