How is Enterprise Risk Management Important?
Risk teams are fuelling their efforts to connect top-level risks to the business's front-line operations and gathering data to effectively contribute to strategic conversations.
FREMONT, CA: In several projects, risks are identified and analyzed in a random, brainstorming fashion. This is often key to the project's success, as unexpected risks come in, which have not been assessed or planned for and have to be dealt with on an emergency basis, rather than be prepared for and defended against in a planned, measured. Very early in the preparation and planning stage, it is vital that potential risks are identified, categorized, and assessed. Here are three emerging trends in enterprise risk management.
• Quantifying the Value of ERM
ERM teams are working to change their teams' perception away from being the risk police to being value providers that help initiatives throughout the organization. But for them to help value management, ERM teams require to gain earlier visibility into initiatives, rather than just being looped in to react to risks. The most promising method for proving the value of an ERM program is quantifying loss events and mitigating the number of loss events by deploying controls recommended by risk teams. One method to quantify loss events is to leverage technology and software that automates the gathering of metrics systematically that makes reporting on these loss events part of the everyday workflow for the enterprise units.
• Operational Focus
Getting down to the operational perspective includes doing assessments with lower-level operational staff in the company and being embedded in operations, and being responsible for approving operational risks. This might include having the domain expertise on operational risks and controls to help their business units and then conducting root cause analyses to find a concentration of risk. This means having the infrastructure in place to collect complete data on risk events and other incidents and then put controls in place to avoid future incidents.
• Managing Emerging Risks
ERM teams are focused on guarding the organization against emerging risks. Risk teams are under heightened pressure to get ahead of executives and investors actively finding new risks to the company. Having good historical data can identify real risks and prevent risk teams from focusing on phantom risks – risks that are escalated because of a bias, political motive, or data withholding.