According to a recent survey for the Risk & Insurance Management Society, more than half of risk professionals are using enterprise risk management (ERM) programs in their companies. Of nearly 1,100 risk managers, insurance buyers and other risk professionals that featured on the survey, 63% of respondents stated they have ‘fully or partially integrated’ ERM strategies into their risk management programs. Of course, the bigger the business, the bigger the number of risks. However, enterprise risk management is becoming increasingly popular among businesses of all shapes and sizes as it effectively ensures that risks are evaluated and avoided while any credible opportunities to achieve the company’s objectives are seized. But it’s not always easy finding the right ERM strategy for your business. By following these simple steps however, ERM can be made easy.
Determining your Objectives & Risk Appetite
Before you can go about identifying potential risks that could threaten your organization, you must address your risk appetite and outline a clear set of objectives. Determining the objectives of your ERM strategy will help you develop a philosophy towards risk management. What determines these objectives will be your organization’s risk appetite. Implementing an effective Enterprise risk management strategy is a process. You won’t be able to make changes over night. Defining your risk appetite and philosophy towards risk management should top your ERM agenda so that you can set about outlining objectives and subsequently identifying what risks you need to be wary ofs.
In many ways, the identification of risks is exactly what your Risk Management Strategy is designed to do. Risk events that could negatively impact on the company and it’s objectives are the biggest consideration of the enterprise risk management process. These risks, internal and external, must be identified and assessed so that you can prepare for and protect against them. By considering factors such as likelihood and potential impact is surest way of assessing how they should be managed.
Responding to potential risk events
Once you have a clear indication of what risks may negatively impact on your business, you can go about setting out a preventative strategy, aimed at mitigating the possibility of a risk event occurring. The enterprise risk management process should not only be used as a preventative measure however, it should also give businesses the technical know-how of responding to these potential events. Some responsive measures include avoiding, accepting, sharing and reducing risks. Whichever step the company chooses to take depends entirely on the outlined objectives and risk appetite of the company.
All of the above steps would be rendered completely useless if the company’s enterprise risk management strategy was not applied at every level of the organization, on a consistent basis. Employees at every level must be trained in on the risk management plan. By applying policies and procedures that allow risk response to be effectively carried out, you can brief your entire staff on company policy with regards ERM. In order to ensure every inch of the operation is under the one roof, a strong communication strategy must exist across a company, at every level.
Once an effective enterprise risk management strategy has been established, changes will occasionally need to be made to keep the plan up to date with the constant changes within the company. Other factors such as emerging risks and reputational risk management may also impact on the ERM strategy so it is important to remain flexible and open to policy changes. First and foremost though, it is important to set out your strategy as outlined above. In doing so, you can easily ensure the protection of your Business and the safety of the brand.
Risk Management can be challenging for businesses, particularly with continuously emerging risks. By getting yourself a free risk assessment, you can protect your business against the challenges that lay ahead.
Coy Sunderman is a risk advisor specializing in risk solutions for construction businesses, oil & gas operations, manufacturers and distributors/wholesales. Coy is a Certified Work Comp Advisory and holds his CIC (Certified Insurance Counselor) designation.