Running a business is a risky proposition. Between hazards, finances, operations, and strategy, there a number of factors at play in the successful administration of an enterprise, each of which could bring progress to a screeching halt. That’s why many companies choose to implement enterprise wide risk management solutions. Risk management consulting firms specialize in helping organizations to manage the risks inhibiting success and seize the opportunities that could help them reach their goals.
Enterprise wide risk management can help corporations to grow when solutions are implemented effectively. Here, we’ll outline the framework typically provided by business risk services for enterprise wide risk management.
- Determine Goals
Before it is possible to determine which risks are most threatening to a company’s goals, those goals must be stated in clearly defined terms. Goals might include profit increases, greater customer satisfaction, higher employee retention rates, or acquisition of more accounts. Regardless of the goals themselves, they must be measurable through some form of assessment such as data or surveys.
- Identify Risks and Opportunities
Risks can fall under four categories: hazard risks, financial risks, operational risks, and strategic risks. Hazard risks include liability issues, property damage, and natural catastrophes. Financial risks are things like pricing, asset, currency, and liquidity risks. Examples of operational risks are customer satisfaction, product failure, integrity, and reputation. Competition, social trend, and capital availability are all examples of strategic risks. Risks considered to be “major” include changing compliance and regulatory mandates, market volatility, budget uncertainty, people, technologies, operational processes, and information complexities. A strong enterprise wide risk management consultant will help a business identify which risks are present and what opportunities are available for improvement.
- Assess Likelihood and Magnitude
Though a litany of risks can be more or less present for any given corporation, it is important to quantify and prioritize these risks by examining their likelihood of occurrence and potential effects. Most risk management consultants will have tools for the creation of probability distributions of outcomes for material risks and will be able to aggregate all those distributions to reflect correlations. That data can result in a formulation of results that describes the impact of each risk on an organization’s key performance metrics.
- Determine a Response Strategy
After assessing the probability and potential effects of each risk, a consultant will help clients develop enterprise risk management solutions designed to minimize risks and take advantage of competitive opportunities. Implementation of these strategies is intended to promote business growth and goal achievement. Many services offer pre designed approaches to the management of certain risks, including managed security services, a system designed to manage an organization’s security needs.
- Monitor Progress
Continual assessment of progress toward the initial goals is critical to the risk management process, allowing corporations to celebrate successes and to tweak practices that could be improved.
The enterprise wide risk management system is continuing to evolve under the watchful eye of such organizations as the Project Management Institute and the National Institute of Standards and Technology. The future of enterprise risk management is likely to include policies designed to keep company stakeholders informed about the potential risks threatening the companies in which they have vested interests, in order to keep businesses accountable for the management of those risks. As the industry continues to grow, there is little doubt that it will create positive change for companies wishing to accomplish their goals and experience success. Continue: essextec.com