Is it possible to manage risks of the third decade of the twenty-first century using tools and techniques from the last millennium?
Well, are your risks the same?
Not so long ago, risks could be neatly categorized and managed independently. The risk management department could oversee a curated list of risks, run reports, and periodically update top management on the status. While they weren’t always pretty, spreadsheets got the job done, thank you very much.
A New Risk Reality
Risks today are growing exponentially in number and complexity. Indeed, one risk event – like a cyberattack – could impact operations, finances, strategy, reputation, and more. Organizations of all sizes now find themselves dealing with a constant onslaught of unpredictable events, tougher mandates, and relentless scrutiny from regulators, investors, employees, and customers.
More than two-thirds of organizations, in fact, have experienced an operational surprise from a risk they did not adequately anticipate. These “surprises” can end up crippling – or destroying – a company’s brand, its reputation, or even the organization itself. With stakes this high, it’s no wonder that 65% of boards are calling for more risk oversight from top management.
Delivering the necessary risk insight and intelligence takes more than just maintaining the status quo – it takes Enterprise Risk Management.
Put All Risks on Your Radar
ERM is a structured, proactive, and continuous process that is applied across the organization to better understand all risks, how they relate to each other, and the cumulative impact on the organization.
Unlike traditional risk management, which primarily focuses on insurable risks viewed independently, ERM encompasses all risks and opportunities that affect an organization’s performance, including intangibles like reputation. It looks to increase an organization’s value by both minimizing losses and maximizing opportunities for growth. With ERM you can manage risk strategically, proactively, and holistically.
A 21st Century Approach
While the idea of involving the entire enterprise in managing risk may seem daunting, here are five reasons why it’s worth the effort to elevate your risk management program to the enterprise level:
- Faster response. ERM identifies all risks and the associated magnitude so you know what you’re facing and can plan your response in advance. So instead of taking time to figure out what to do after an event occurs, you can move directly into action and better contain the fallout.
- Better decision making. The impact of one risk can have a ripple effect on many others. ERM holistically looks at all risks and the collective impact on the organization so you can factor both upstream and downstream consequences into your decisions.
- More collaboration. No risk exists in a silo. ERM brings risk information from every corner of the organization into one place where all stakeholders can easily communicate and collaborate on the best course of action for the organization.
- Greater adaptability. ERM is a flexible process that easily adapts to changing risk conditions. It is designed specifically to identify new and emerging risks, prioritize actions, and measure results in terms of the value created for the organization.
- More risk-aware culture. Risk is everywhere – and effectively anticipating and addressing risk at a strategic level takes enterprise-wide participation. An ERM program promotes a risk-aware culture by involving people at all levels and functions and making them personally responsible for identifying and managing risk in their everyday work. And the deeper risk management is engrained in the culture, the more likely you’ll be able to reduce uncertainties that could undermine future performance.
ERM doesn’t eliminate risk – of course – but it will minimize surprises. And if something unexpected does happen, you’ll have the knowledge, tools, and culture to turn those challenges into opportunities for success. Are you prepared to confidently and effectively manage risks of the third decade of the twenty-first century?
To learn more about ERM, why it’s worthwhile, and how to begin managing risk holistically, download our e-book, Charting a Course for Enterprise Risk Management.