Corporate leadership is often veiled from the multitude of risks that are lurking behind the corners of their business. Critical risks embedded within business units often aren’t shared up to senior leadership because the systems and processes are not in place to enable this. The methodologies implemented for managing risks across the enterprise vary widely but most are chaotic, relying and email and spreadsheets for tracking a reporting.
A process driven approach to risk identification, assessment, and remediation helps to ensure that a continuous improvement mentality is ingrained within the business.
Traditionally, implementing a process oriented approach to enterprise risk management was a time consuming endeavor. It often takes teams of people to shepherd the process ensuring that each part of the organization is effectively identifying risks and implementing plans of action to effectively reduce the impact and likelihood of those risks. However, technologies with robust workflow, approval mechanisms, and reporting helps builds structure around an organization’s enterprise risk management regime.
Out-of-date, traditional ERM software (and GRC software more generally) do not enable collaboration across the business, hence critical risks are not propagated up through the organization.
Allowing the line of business managers to share and collaborate in the risk identification process is the best way to expand the quality and volume of key events that can impact organizations. Setting up a quarterly or annual cycle for risk identification helps to institute the continuous documentation process within employees.
Software used for enterprise risk management activities must engage the business and be easy to use. Without quick and painless adoption from the business, an organization’s ERM program will quickly fail.
Risk assessments can be interpreted differently by each employee. Building structure around the assessment process ensures uniform and accurate assessment results.
When a line of business manager is assessing the impact of a risk on the business, there is often much room for interpretation. Risk assessments must be simple and include specific instructions. Validations and checks should be built-in to allow for robust data quality.
Risk assessment without mitigation is flawed.
Enterprises have a tendency to over emphasis risk identification and assessment, but fail to fully execute on mitigation. Risk mitigation is where process is the most crucial. KPIs should be tracked to ensure that each line of business is following their plan of action and risks are being reduced. A technology enabled process approach can ensure that KPI reviews are performed and regular intervals.
Technology can create flexibility in spite of an organization’s management hierarchy.
Adaptability in an organization’s hierarchical structure (or the capability to adjust their authoritative structures to changes in the market) can assist in remediating risks in large-scale enterprises. However, large organizations cannot easily change how they operate internally without an enabling force. Agile technology that can adapt to the business and provide a framework for flexibility will ultimately help to improve risk assessment and mitigation.
Great communication cannot be overemphasized in enterprise risk management.
The type of communication that is necessary is just as important as the communication that occurs. Information must be free flowing, and it should lead to the development of collaborative models of the risks across the enterprise.
A process-focused framework for ERM creates high-performance organizations that are able to mitigate and control key risks within the organization. Paying attention to how senior leadership interfaces with the various lines of business is critical to building the continuous improvement mentality of risk management. Agile GRC technology should be utilized to help assist leadership with implementing the process-focused approach to enterprise risk management.
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