Business environments change at a rapid pace and, for organizations, maintaining an up-to-date enterprise risk management (ERM) strategy could help mitigate risk.
There's growing pressure for businesses to establish their ERM strategy to better prevent risk exposures, closely monitor and focus on possible new risks that could affect operations, the Global Association of Risk Professionals reported.
In a survey done by CEB, a world-leading advisor company, 78 percent of businesses are looking to develop their method of crafting key risk indicators (KRIs). While most companies understand the importance of ERM, many don't know how to set up the proper risk identification process.
The first step in any successful ERM strategy is to identify the potential risks and section each one into specific categories such as financial, operational, strategic and compliance, reported Deloitte. Plans need a sub-category as well that will monitor the market, credit, liquidity for corporations, capital functions or projects.
One of the main challenges of setting up a successful ERM plan is making sure senior management is up to date with any incident information. ERM strategies need to have a solid chain of command so possible risks or problems don't get lost between each department. According to the source, senior management needs to have priority in an ERM plan.
Taking actions and critical decision making
ERM strategies rely heavily on communication and being able to reach the right person to mitigate risk as much as possible. According to GARP, ERM plans should be actionable in the sense that management will have enough time to make the right decision.
Preparedness is essential to risk management because early warnings could help avoid risks altogether. At minimum, companies that are prepared for incidents will be able to secure the gaps in between departments throughout the organization. According to Deloitte, responding to a risk is one of the most important responsibilities for organizations trying to prevent the incident from affecting operations.
Companies have to examine, accept, reduce, share or avoid potential risk, but being ready with a strategic plan could help the process. More organizations are starting to rely on risk management software to analyze the possible trends of incidents in a specific area.
Risk management software with historical reporting and analysis (HRA) features allows users to easily access databases for extracting detailed information such as information on a general region, specific time frame, amount of severity and type of incident. Using risk management software allows companies to have answers to the when, what and where questions of an incident.