Enterprise risk management (ERM) is a business strategy designed to identify and manage all the risks that a company might encounter in achieving its objectives. The process involves identifying and assessing risks, determining the likelihood and impact of each one, then creating and implementing a plan to mitigate, transfer or accept the risks. Here are five how-to questions for implementing ERM, along with specific actions that companies can take to manage their risks.
We asked Norman Adriano, Inquirer Academy’s subject matter expert on operations and supply chain, some key questions to help your company with risk management.
Q: How can you identify risks to your business?
To identify risks to your business, you need to conduct a risk assessment. This involves gathering information about the business, the industry and the environment, and analyzing it to determine what risks are present. You can use several methods to do this, including risk mapping, scenario analysis and brainstorming sessions with key stakeholders.
Actionable tip: Start by identifying the key objectives of your business, then list the internal and external factors that could impact them. Brainstorm with your team to identify risks that could arise from these factors and use tools like risk heat maps and risk registers to track them.
Q: How can you prioritize risks and allocate resources to manage them?
Once you have identified the risks to your business, you need to prioritize them based on their likelihood and potential impact. This will help you determine which risks require the most attention and resources. You can use various techniques to prioritize risks, such as the risk matrix, which plots risks based on their likelihood and impact.
Actionable tip: Use a risk matrix to prioritize risks based on their likelihood and impact, and allocate resources accordingly. Focus on risks that are high-impact and with high likelihood, and develop plans to mitigate or manage them.
Q: How can you monitor and measure the effectiveness of your risk management strategies?
To ensure that your risk management strategies are effective, you need to monitor and measure their impact. This involves setting key performance indicators (KPIs) that measure the effectiveness of your strategies, such as the number of incidents or losses avoided. You should also establish a system for monitoring and reporting on risks and the effectiveness of your risk management strategies.
Actionable tip: Establish KPIs for each risk management strategy, and regularly monitor and report on progress against these KPIs. Use tools like dashboards and scorecards to make it easy to track performance.
Q: How can you integrate ERM into your overall business strategy?
To make ERM effective, it needs to be integrated into your overall business strategy. This involves aligning risk management objectives with the overall business strategy, embedding risk management processes into business processes and building risk management capability throughout the organization.
Actionable tip: Ensure that ERM is aligned with the overall business strategy and that risk management processes are embedded into business processes. Develop a risk-aware culture by providing training and communication to all employees, and by involving them in risk management activities.
Q: How can you ensure that ERM is sustainable and adaptable to changing circumstances?
ERM needs to be sustainable and adaptable to changing circumstances, which requires ongoing review and refinement. This involves regularly reviewing risk management strategies, ensuring that risk management processes are up-to-date and adapting to changes in the business environment.
Actionable tip: Regularly review and refine your risk management strategies, and ensure that risk management processes are up to date. Use tools like risk maturity models to assess the effectiveness of your risk management capabilities and identify areas for improvement.
In conclusion, implementing ERM is crucial in ensuring that your business is resilient and sustainable in the face of risks. By identifying risks, prioritizing them, monitoring and measuring their impact, integrating ERM into your overall business strategy, and ensuring that ERM is sustainable and adaptable, you can effectively manage risks and position your business for success. INQAdriano will facilitate a live virtual workshop titled “Enterprise risk management: A practical guide to ensuring your business future” on March 30 to March 31.
For more information, write to ask@inquireracademy.com or send an SMS to 0919-3428667 and 0998-9641731.
For your other online learning needs, Inquirer Academy could assist you in designing and facilitating a virtual workshop, a webinar or a self-paced online course for your organization.
The author is the executive of Inquirer Academy.