In the present day and age, Risks need to be considered as Opportunities for Value Creation and not something that has to be minimized or avoided, as Risks are not fully avoidable but their timely identification, monitoring and remedial action is a sure shot way to gain Competitive Edge. Globally many Companies have started to demonstrate a growing concern about the need for a Strategic Risk Management Framework, considering the recent upsurge of financial scandals, fraud Risks and non-compliance Risks. An effective Risk Management Framework has to be conducted in a structured way, integrated across the whole company, as the expectations from ERM function have stepped up due to increased pressure from the changing global market and the Regulators, to gain competitive advantage and to demonstrate good Business Practices. Here is how we summarize ERM Best Practices for 2019 and beyond.
Timely Adoption of Emerging Technologies for an efficient ERM process
When there is any change of a Risk due to geopolitical uncertainties, evolving Technology or economic shifts, it is in the best interest of the Company to recognize the insight and act upon it as quickly as possible. This gives the Organization the time advantage of identifying emerging Risks and creates decision-making options for its Risk Management, Audit, Compliance and Governance teams. Resistance to change could restrict the Organization from making necessary adjustments to the Business model and core Operations.
Leveraging the power of Real time Risk Reporting
Risk Reporting should be Agile and nimble so as to enable accurate decision making. Conventional Risk Reporting is often not actionable enough to support decision-making processes. Inability to utilize data analytics to achieve market intelligence and increase efficiency may significantly impact the effectiveness of the ERM Process. Significant Risks warranting immediate action by the Executive Management and the Board should be escalated to Directors’ attention in Real time. A process for identifying Emerging Risks should be in place to supplement the ongoing Risk Assessment process.
Risk Assessment and Prioritization for effective and efficient ERM
Risk Assessment process should be simple, practical and easy to understand for it to be effective and sustainable and performed by right people with right skills supported with right Technology. Risk Assessment is all about measuring and prioritizing Risks. Many organizations, in their early stages, start the ERM journey with a simple spreadsheet, which along with course of time requires an Automated and Agile Technology for analytical and reporting requirements. To understand their Risk exposure, Organizations need to improve their Risk Assessment process, given today’s Business complexities. Traditionally, Risk Analysis/Assessment identifies Risk as a function of likelihood and impact. By gauging how quickly they occur, you identify the need for Agility and adaptation of right methodologies. Defining common standards, coordinating assessments across Business units, facilitating analysis of Risk interaction and Risk Reporting are the requisites of an ERM function. ERM framework enables the use of information to make the decisions about Risk responses and monitoring, and feeds into the planning process for the managers or the Risk owners to border the Risks within the desired tolerance thresholds. In the current scenario, a shift from traditional Risk Management mindset to an Agile & Automated one is what will enable continuous growth with Transparency.
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