Risk management must be a part of every critical decision throughout the organization. (Photo: Shutterstock)
Success these days depends on your ability to immediately grasp all of your current risks, anticipate what's around the corner, and understand what it means for the organization. And there's no room for error.
An enterprise risk management (ERM) program can help you make smart decisions about risk that will put you on the path toward success. ERM collectively looks at all risks, how they relate to each other, and the cumulative impact on the organization. It looks to increase an organization's value by both minimizing losses and maximizing opportunities for growth.
Advances in technology are making it easier than ever to manage risks at an enterprise level. But technology alone is not the answer. For ERM to be successful, you have to cultivate a risk culture.
Risk management must be a part of every critical decision throughout the organization. People at all levels and functions must not only understand the organization's approach to risk but take personal responsibility for managing risk in their everyday work.
Making that happen requires top-level buy-in. If the C-suite incorporates risk into their decisions, others will follow. Add to that by communicating widely, clearly, and continuously about expectations. Assign responsibility for managing specific risks — and hold people accountable.
With ERM, risk management is everyone's responsibility. Here are six steps to help you launch an ERM program — and begin instilling an ERM mindset throughout your organization:
- Identify your risks and the potential impact on the organization. What is your strategy for responding to risk — and how will ERM help create and protect value?
- Leverage what your organization is already doing to manage risk. Apply current practices and strategies for managing well-understood risks, like worker injuries, to other risks.
- Build support. Enlist the support of all stakeholders: operations, sales, accounting, legal, and more. And designate a leader — preferably from the C-suite — to champion the ERM cause.
- Break it down. The idea of managing all risks can be overwhelming at first, so start with the risks that have the biggest impact on the company's success and build from there.
- Assign accountability. Designate responsibility for each risk to whoever is most closely associated with that risk.
- Report on progress. How has ERM added value to the organization?
Even with everyone on board, ERM won't eliminate risk — but it will minimize surprises. While it can feel uncomfortable at first to involve disciplines outside the risk management department, ERM is well worth the effort. It breaks down silos, adapts to changing conditions, and supports better decision making. And if something unexpected does happen, you'll have the knowledge, tools, and culture to turn those challenges into opportunities for success.
David Brown is a senior product manager at Riskonnect, an integrated risk management software solution provider.
This piece first appeared on Riskonnect's blog and is republished here with its consent. Opinions expressed here are the author's own.
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