The Need For An Enterprise Risk Management Framework

Enterprise risk management framework

Risk management needs to be in place across every company in every industry. After all, the goal should always be to manage risks and avoid issues. There are various principles and concepts that need to be discussed within an organization and it is possible to use enterprise risk management framework to help manage the overall approach.

There needs to be some kind of internal control in place and enterprise risk management framework will help with this. There may be stakeholders, clients, and even department heads that want to understand the risks that face the organization and ensure they are being managed effectively.

There are all sorts of different risks that can plague an organization. These include:

  • Hazards
  • Financial risks
  • Operational risks
  • Strategic risks

Most organizations have the possibility of experiencing a risk in any of these areas at any time. A hazard could include a natural catastrophe while an operational risk could include internal poaching or even customer satisfaction ratings.

Enterprise risk management

As such, organizations need to use enterprise risk management framework in order to address all of the possible risks. This begins by identifying all of the potential risks. The goal is to then avoid activities that could lead to certain risks and take action that will reduce the likelihood of certain risks from taking place. There may then be the ability to share or insure the risks and then accept that some risks are simply going to be present at all times.

The full process including establishing, identifying, analyzing, integrating, assessing, treating, and monitoring. The framework is designed to help manage this entire process and have key performance metrics in place so that everyone within an organization are aware of the risks and know where to place their due diligence throughout their day to day actions.

Companies that have risk management framework are better prepared in the event that something does happen. They also reduce the risk of something catastrophic happening. There are going to be fewer “surprises” because they have already taken the initiative to change the way they do business so that there are fewer risks in place – and this is across all departments. They will be able to avoid financial risks that could otherwise spell ruin for their organization. They have the insurance policies in place to be able to pick up the pieces if there is a natural disaster, and they have done what they can to keep customers happy and ensure that departments get the support that they need.

The only way to avoid risk is to manage it. Some risks can be eliminated entirely. However, the most risks that plague a company can only be managed, and this is when it’s critical to have ERM in place. There is framework available and it can have a significant impact on the way a business not only operates daily, but how they are able to bounce back from issues that would otherwise cause other businesses to tumble and fall.

Leave a Reply

Your email address will not be published. Required fields are marked *