If you’ve Googled Enterprise Risk Management (ERM), the results can make your head spin. To simplify what all this means, we’re going back to the basics of what ERM is and why it’s something organisations need to invest in.
Let’s face it, all organisations face uncertainty. It is the effect of this uncertainty on business objectives that represents risks to your organisation.
So, what is ERM? At its core, enterprise risk management is everything an organisation has and does towards actively managing risk. Through the active management of these risks, organisations look to minimise those risks that could be detrimental or have a negative impact, while seeking to maximise return on those risks that can have a positive impact or outcome.
The purpose of all this is to quite simply ensure that the organisation has the best available information to inform sound business decisions. To do this well, requires all the various departments and functions to work together so that the organisation can have a holistic view of its risk environment.
Over many years, conversations within organisations have evolved to now include external factors like the environment, industry and government regulatory bodies, and even customer/client expectations. This acknowledgement that risk is influenced by more than what is within your immediate control is another reason why enterprise risk management has become even more imperative to ensuring organisational success.
Further to this, there are many options available regarding how an organisation develops and implements sound risk management processes, practices and systems. To assist there are standards like that of the International Organisation for Standardisation (ISO) standards. Though, even with all this information on hand, enterprise risk management needs to be reflective of your organisational maturity if it is to be successful in informing and ensuring sound business decisions.
With so much information available on enterprise risk management, why should your organisation consider it?
With a well-considered enterprise risk management strategy that takes into account your business environment and maturity, as well as how various business areas can align their efforts to managing risks most critical to the success of the organisation, the approach to risk management becomes more efficient, effective and provides better information to inform your business decisions and direction. In its most simplistic form, enterprise risk management looks to provide the information to enable and empower great business outcomes.