The contemporary business world offers plethora of challenges. The globalization is increasingly making it difficult for the businesses to survive because of the increased volume and complexity of the adversaries surrounding it. While the circumference of the business world is slowly becoming condensed, the challenges that it offers require effective risk management (ERM) strategies to handle the risks with aplomb.
To adequately mitigate and manage the business and industry-specific risks, enterprises must make an effective, repeatable and formal risk assessment process before making vital business decisions. Here’s how you can build enterprise risk management office to help your firm’s successful survival.
Recognize the significance of an ERM Program
The first and foremost critical step in building an ERM program is to acknowledge the need and value of it. It is of crucial significance that the senior management recognizes the formal requirement of ERM program and help others adapt to it. This helps in successfully driving and implementing the policy framework that will closely guide systems of controls and supervision for effectively mitigating the risks. Unless the top management will not help be confident about the ERM, the implementation could be challenging.
Integrating Three Dimensions of ERM
Any ERM program, must take into account the following three dimensions:
- Performance management: The objectively and transparently measured objectives should be constantly monitored to effectively manage business process.
- Risk management: the core aspect, it should measure the uncertainty that is associated with the achievements of objectives.
- Compliance: Adherence to laws, regulations, promises and objective that are pursued.
Creating a risk mitigating culture is the core of implementing and adapting to an effective ERM program. Unless, your employees have an inherently cultivated habit of risk management, the results will be hard to achieve and difficult to maintain.