Most organizations are too apprehensive about taking big bets, especially if they do not have clear visibility and assessment of their risk appetite. A comprehensive ERM strategy can drive business performance and aid growth prospects while helping the organization to build an unmatched competitive edge.Download an Insight
Markets today belong to those who have the ability to take risks and bet big. This, however, does not mean you need to gamble with your prospects. Success lies in taking well measured risks, based on a thorough understanding of your organization’s appetite for risks and the safeguards it has in place. This also adds to your conﬁdence in your organization’s elasticity to take an innovative and distinct path to growth.Top line growth undoubtedly is the foremost concern for the senior executives and business leaders. The question is how do you enable your leadership to achieve this goal? Of course, the answer lies in an eﬀective and robust Enterprise Risk Management Program which is part of the business strategy itself. “A well designed Enterprise Risk Management (ERM) program is an oﬀensive, not a defensive strategy”, according to PwC’s report titled How to Overcome 10 Key ERM Challenges.
The State of an ERM Strategy Today
That an ERM program is a necessity is a foregone conclusion and most organizations have put some form of risk management system in place. However, the catch lies in the depth, breadth, and comprehensiveness of such programs. Diﬀerent organizations ﬁnd themselves at diﬀerent levels of risk maturity. Therefore, it is important that you assess these levels and take appropriate measures to move up the maturity curve.
Know Where You Stand
Due to the staggered nature of the ERM processes, risk managers are constantly struggling to manage risks. Risk management is directly linked to the performance of various functions and the organization as a whole. However, most organizations fail to convincingly project this connection and lose out on getting stakeholder buy-in. More importantly, a scattered and siloed approach provides an incomplete or even a ﬂawed picture of an organization’s risk exposure and appetite. This only adds to the concerns of the top executives. How do you focus on growth when you do not have a clear view of where you stand?
Building the Growth Offensive
An eﬀective and robust ERM program has to be part of the narrative from the onset and must deﬁnitely be a major chapter in your organization’s business strategy. This would mean a clear mandate from the management. But how do you win over the board and top executives? As mentioned earlier, performance is closely associated with eﬀective risk management . It is important that this is properly exhibited and explained.
Centralised and Integrated Risk Framework
What is important is that the ERM framework is linked to the overall vision, mission and goals of your organization with clearly deﬁned beneﬁts. The leadership must be presented with a comprehensive project plan that includes all aspects of risks involved and their mitigation processes. A siloed approach is doomed from the beginning; an integrated and centralised risk framework is crucial. Consistency is an absolute necessity. Therefore a single risk taxonomy needs to be developed, with uniform vocabulary and similar rating scales used in deﬁning and measuring risks.
Integrate Risk Management in Business Decisions and Strategy Discussions
A streamlined framework and integrated approach that helps build a strong risk culture aligned with various units and processes is the ultimate asset in building an eﬀective ERM program. Visibility to the granular details of risks that each unit or process faces, helps in strengthening the mitigation mechanism. It also enables informed and strategic decision-making at highest levels, making the reporting structure and format critical. The key is to communicate clearly, conﬁdently and continuously to impress upon your organization the current state of risks that every function and process is exposed to. Once a comprehensive ERM strategy is built, a regular board level reporting and review process must be put in place. A uniﬁed view of enterprise-wide risk is a valuable contributor in building your business strategy at the top and can help in quick and informed decision making.
Technology, the Partner in Growth
Technology is one of the most important enablers for an eﬀective ERM program. It gives you a better understanding of the risk proﬁles of various functions and processes as well of the organization as a whole. This enables the decision makers to quickly determine the potential risk impact, and to develop an action plan accordingly. A clear and real-time visibility into various risks and their levels allows risk managers to accurately assess your organization’s risks against its risk appetite to make informed decisions. Powerful dashboards, heat maps and charts with real –time information improve transparency in risk and control management. ERM powered by the latest technologies, such as business intelligence and advanced analytics, also provides the ultimate strength to the top leadership in making measured bets in a competitive market. With a ﬂexible and adaptable risk control framework based on industry standards and the ability to quantitatively and qualitatively assess risks with scenario modelling, organizations can be virtually fortiﬁed for any market eventuality.
Improve Business Performance with Risk Forecast and Proactive mitigation
Risk intelligence is directly linked to business performance. With better collaboration and a single version of truth, not only is the leadership able to take informed decisions, but the performance of each function and organization as an entity also improves. Regular risk assessment reports ensure that the probability of sudden disruptions are minimized. Risk managers are also enabled to build proactive measures to ensure quick and proper risk mitigation. A clear visibility into the kinds and levels of risk and its preparedness levels on mitigation mechanism makes your organization better equipped to outsmart competitors. Thus, your organization is better prepared to take on risks posed from outside or within.
Can You Aﬀord To Procrastinate on ERM Strategy?
This brings us back to our original question- can any organization looking toward aggressive growth aﬀord to put oﬀ an eﬀective ERM program any longer? With increased threats emerging from various quarters – market, technology, systems and processes, to name a few- a strong and robust risk management program has already become a hygiene factor. Executive leadership is looking to leapfrog ahead of the curve and CROs are on their toes tracking key thresholds. Risk managers at various levels are under pressure to keep the risk proﬁle under control. In such a scenario, a comprehensive ERM program that understands and aligns itself to your business strategy is essential, to say the least. Growth demands a larger risk appetite, and only clear visibility of current risks and mitigation capabilities can arm the leaders to take the big bets required to strive in a competitive market.