Every business project comes with several internal and external risks that can never be fully mitigated. As a result, it is essential for your risk management strategy to be defence-driven, comprehensive, and most importantly, highly intuitive. Check out this post to know some of the most important aspects of such competent ERM strategies.
Enterprise Risk Management or ERM has been a buzzword in the business world for quite some time now. Most project managers and executives would individually agree that they understand it right, but gather a few of them to discuss ERM, and they will mostly disagree with each other’s opinion.
For most businesses, ERM is all about creating a list of common risks and summarising the risk responses. But ERM is much more than that. In this age of fierce competition and an increasing number of business risks, your ERM strategy needs to be as comprehensive and intuitive as possible. So, what are the important components of an effective ERM strategy? Here is a list of some of them-
- Understanding the Internal Work Environment
The work culture of your organisation has a significant impact on your ERM strategy. Especially, the seniors and their aptitude can make or break your risk management strategy. It is often seen that while the seniors like the C-suite executives are themselves very qualified, they don’t put a lot of effort in training the juniors and thus putting the business under a lot of risks.
Even team leaders aggressively push for completion of tasks, and this is very commonly done at the cost of overlooking the risks. In other words, it is essential for all the members of your organisation to understand ERM and work together to mitigate the risks.
- Setting ERM Objective
The next important aspect of ERM is setting objectives. The vision and mission of your organisation can be taken into consideration for setting the foundation of your ERM strategy. You also need to consider the resource and monetary investments for particular projects to understand the level of risk a project carries.
Start focusing on the obvious risks of a project and whether or not your organisation is prepared to tackle them. Based on the risk appetite, you should also work on the expected risk variations to make sure that the organisation is prepared not just for the obvious risks but for the related variations too.
- Risk Assessment
The risk assessment step is about measuring the risk priorities. The expected risks can be evaluated based on the outcomes they could result in. Risks with the highest level of priority would be taken into consideration first in your ERM strategy. It is also essential to know that most risks are often inter-linked.
So, a risk which is at the bottom of your priority list can also be the actual cause of concern. This can be avoided with the help of probability charts where the expected interactions of the different risks can be plotted, and the necessary steps to avert them can be added to your ERM strategy.
- Responding to the Risk
Once the risk appetite and risk tolerance are known, and the risks are prioritised, the next step is to work on a response plan. Most organisations use a 4-part framework which includes- Avoid, Reduce, Transfer, and Accept. The project an organisation is working upon and the regulations it follows will play a crucial role in creating the response plan.
Irrespective of what type of response plan you create, it will be very important to regularly monitor the same to ensure that you do not go off track. Leaders will have to encourage the employees with regards to implementing risk responses and monitoring to ensure that ERM is an ongoing process across the enterprise.
How Can Risk Advisory Help?
Professional risk advisory services can help businesses enhance their competitive advantage with the help of custom risk advisory solutions. The multi-disciplinary team of such services often has experienced professionals from different fields like ERM, internal audit and compliance, IT and cybersecurity, governance, and more to help businesses create efficient risk management strategies.
With the increasing number of risks modern businesses are now subject to, professional risk advisory is an obvious choice for most organisations. If your organisation is concerned about ERM, look for one such reputed service provider to not only mitigate the risks effectively but also get a competitive edge that can help a business grow further.