Running an organization requires several things to manage and when you manage things, there will be a possibility of risk and problems. And as a moral responsibility of any organization, you need to be prepared for all the future risks. This will not only mean to craft a plan or strategy, but you also require something more advanced and effective.
And this when Enterprise Risk Management (ERM) comes into the picture.
What is Enterprise Risk Management (ERM)?
Enterprise Risk Management (ERM) is a plan based process management that assesses, recognizes, and makes the organization compatible with all kinds of dangers and hazards. This will also include the organization’s objectives and operation.
ERM is all about structuring the organization effectively so that it can be dealt with the risk. Such risk management programs are made to add more value to the company. Whether you consider organizational objectives or KPI’s, efficiently implemented ERM will always give you outstanding outcomes.
Also, stakeholders of your organization are always looking at your organization to find out how you are implementing ERM. So, a well-implemented ERM program is very important for any organization. If you are not implementing ERM properly then your organization should be named as incompetent.
So, there is no rocket science or magic in implementing ERM in your organization. Here are some guidelines and basic things that you need to keep in mind while implementing an outstanding ERM program.
Things that will help you in implementing an effective ERM program
Core values that this program will add to your organization
You can’t measure the progress of ERM through traditional investment metrics (i.e – ROI, Return on assets, return on equity and a lot more). So, several organizations focus on four things to calculate ERM: it includes shareholder value, risk mitigation, process consolidation, and silo elimination.
You might find it difficult to get the outcomes because these are highly worthy goals for any organization. To identify the values, firstly you need to understand what your organization is looking for. Find out what business requirements should be fulfilled through a structured ERM program and you will get your answer.
Different Standards and Frameworks of ERM
Before implementing ERM, you need to understand and research different standards and frameworks of ERM. Some people suggest that there is only one right way to define and control the risk. There are several regulated environments, where you need to comply with specific risk management standards, but not everywhere.
So, understanding and researching ERM standards and frameworks will always help you in implementing well structured ERM in your organization.
Your organizations already handle several risks under operations which include business disruption, environmental liability or worker injuries. So, the individual who is handling these risks will also perform a risk assessment and this is how you can take a small step towards implementing ERM.
Recently, COSO (a joint US initiative established in 1985 to prevent corporate fraud) published Enterprise Risk Management Integrating with Strategy and Performance (2017 edition) states that,
“Enterprise risk management is not a function or department. It is the culture, capabilities, and practices that organizations integrate with strategy-setting and apply when they carry out that strategy, to manage risk in creating, preserving, and realizing value.”
And when you already know what your organization is doing then you can efficiently put the existing practices under the scope of ERM.
Implementing Small Goals
We all know that starting with small goals will lead us to a bigger journey. So, this is what you need to do while implementing ERM. There are several successful implementers, who initiated by implementing smaller goals and achieved great success. You need to focus on a single goal or any single area where you want improvement and then move forward.
Make sure you monitor the progress of your single goal and then move forward according to the results you get.
After applying the goals now comes the time to rate those goals with a progress report. It will highlight the difference that ERM program brings to your organization and make sure it is reported in two ways –
- Material risk
- ERM program progression.
Material risk includes all normal business updates such as challenges in implementing risk plans, any changes taken place since the last report, targets and a lot more. While ERM program progression includes all the specific changes and milestones in the ERM objectives.
Keep it simple and significant (KISS)
You need to focus on the fundamentals when you are going to implement ERM in your organization. Once you have established the reason why you are implementing ERM in your organization, the next step would be to make the process clear and simple. Make sure to cut down your messages from long-form to a 2-minute bite that explains everything. Avoid using jargon and always use the terms that everyone understands.
Try to link the message with the organization’s objective rather than connecting it with the risk management process. Start with a formal training program that characterizes a simple training process, utilization of available tools and templates, and you will easily achieve your goals.
We hope that our effective guidelines and things will help you in implementing a result-oriented ERM program in your organization. Whether implementing small goals or researching different standards, make sure you keep all the points in mind before implementing ERM. Organizations that had implemented ERM are fully satisfied and showed magnificent growth. You can take the perfect example of Johnson & Johnson.
You can also consult various consulting companies before implementing the ERM program to witness some great results.
Want to make your organization effective and risk-free? If yes then you need a professional and experienced risk & regulatory solution to get the best outcomes.