4 Simple Benefits of Enterprise Risk Management
Anyone who has experience in risk management will agree with Stanford professor Scott Sagan’s statement that “Things that have never happened before happen all of the time.” Planning for the unknown is inherently uncertain. The high-water line on a Venice canal is only the highest until the next historic flood, just like the largest cyber attack is only the largest until the next bigger one.
Luckily for risk managers and corporate executives, there are tools to help minimize uncertainty. Enterprise risk management (ERM) is one such tool that business leaders in nearly every industry can leverage to better identify, understand and mitigate risk. Conversely, it can help propel an organization forward by embracing the rights risks at the right moments.
ERM is defined as a holistic process of scanning for and identifying, assessing, managing or otherwise treating internal and external risks. What separates ERM from traditional risk management is the emphasis placed on creating a consistent, structured and continuous process that produces a 360-degree view of the risks facing an organization and sharing that view with complete transparency across the entire organization.
This process pushes traditional risk management a step further by approaching risk in a way that accounts for the organization’s strategic business goals. With an intimate understanding of all areas of risk at the enterprise level, business leaders can most effectively allocate their resources in ways that address both insurable and non-insurable risks while aligning with underlying business objectives.
Implementing an ERM process can be a sizeable undertaking, but doesn’t have to be. When properly employed, it promotes transparency of risks between senior staff and board members in ways never before possible. In doing so, businesses can position themselves to thrive today and be prepared to capitalize on opportunities and avoid pitfalls in the future.
In over 20 years of helping implement ERM programs into a wide range of businesses, I’ve identified a number of benefits that nearly every organization can reap through the process. Here are just four of the undeniable benefits of ERM:
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