IT Governance

Integrate Vital ERM Elements to Curb Business Risks

An efficient enterprise risk management (ERM) framework brings oversight to risk measurement, control, strategic execution, and minimizes disruption. In this article by CFO University, John Thackeray explains how enterprise risk management is not limited to a series of problems. It is a comprehensive program that promotes business growth by eliminating risks and seizing opportunities to drive value from improved decision-making.

The Foundation

An effective ERM program is critical to wipe out emerging business threats like loss of revenue, brand value, and stakeholder relations. So, design a suitable ERM framework that aligns with your people, processes, and company infrastructure. It helps in anticipating threats and gives visibility for practical endeavors. Include these key components in your ERM framework to make it effective:

Set Goals

Just like a business strategy, your ERM framework must achieve a specific goal or objective. Usually, it must outline risks associated with your company’s annual revenue, stock value, investor returns, and market position. Assess all the threats to determine the extent of strategic execution necessary to achieve ERM goals. Your ERM framework must counter the risks and execute a robust plan to maintain business stability.

Risk Citation

It specifies the volume of risks you are ready to tackle to achieve the desired return on investment. A risk appetite statement includes business planning, financial, cultural, and operational risks. Senior management is responsible for drafting the statement by seeking feedback from the board. It is communicated through a comprehensive report that needs frequent revision.

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Work Culture

A robust ERM framework encompasses functional and cultural training to improve employee engagement and vision. Good ERM is all about recognizing the need for transformation and managing it within the organization.

Data Management

Enterprise risk management is all about data gathering, integration, and distribution. It must be strong enough to help your venture generate a reliable report.

Inner Strength

The ERM framework helps senior managers reduce internal risks. Indeed, it is one of the most significant ways risk managers can monitor and control emerging threats to the business.

Calculated Risks

By evaluating the risk, you can determine the significance of your staff’s individual and collective concerns. So, you can outline the areas that require immediate intervention, time, energy, and effort to overcome emerging risks.

IT Infusion

By using scenario planning and stress testing tools, you can deal with evident or unspecified risks. Such tools help in developing great contingency plans to shape or counter operational threats for future sustainability. Enterprise risk management is powerful in maintaining the endurance of your company. By integrating it at the right time, you can create a risk-aware workforce that contributes to your year-on-year business growth.

Click on the following link to read the original article: https://cfo.university/library/article/7-key-elements-of-effective-enterprise-risk-management-thackeray

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