Five reasons to start an enterprise risk management programme

Five reasons to start an enterprise risk management programme

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The overall aim of Enterprise Risk Management is to ensure that objectives and goals are achieved, by planning and properly manage significant risks. Risks are identified, assigned an owner and actions taken to control the risks in appropriate ways. Controls can be policies and procedures, providing training or perhaps ensuring that there is insurance in place to reduce the impact if the risk event occurs. Different risks will require different actions and response plans.

Identifying, planning and proper management of risks give the organisation some great benefits:

1. Reduced firefighting
When risks have been identified and acknowledged there will be less surprises in the organisation and with less surprises, there will be less panic and running around if and when a risk event occurs. If an adverse event occurs there will be a clear path of who to turn to and what to do.

2. Become aware of your key risks
By formally identifying and managing significant risks in the organisation the management will have an increased awareness of the organisation’s risks. Financial reports tend to dominate in the boardrooms of organisations that do not practice ERM and often risks such as cyber security and succession planning are not discussed at all. With ERM the risks can be analysed at an aggregated level and risks which previously had not been identified will be brought to management’s attention.

3. Plan ahead and allocate resources where needed
When the business is aware of risks that may occur, preparations will be made to deal with incidents. Budget allocations can be made to ensure that there are financial resources available. By knowing what might happen and having prepared accordingly, pre-defined teams and action plans will be in place.

4. More time to do business and achieving goals
Formal Enterprise Risk Management, by planning, budgeting for and controlling risks frees up capacity in the business to be more productive and to actually do what the business is meant to do - achieving its goals.

5. Assurance for clients and other stakeholders
When clients realise that your organisation is running smoothly and that you are meeting or exceeding customer expectations invaluable trust will develop. ERM encourages a culture of accountability and transparency providing staff and managers a safe environment to bring potential risk events and vulnerabilities to the surface without being blamed. When formal risk management is in place it is easy to deal with regulators and authorities as documentation of compliance will be readily available. ERM will also provide assurance to financiers, suppliers and the wider society of the organisation’s fulfilment of their expectations.

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