Many large firms have found it challenging to adopt organizational reinvention and enterprise risk management. Understanding and overcoming the reasons why the traditional implementation strategy constantly fails is the key to unleashing the potential of both. While some businesses can respond to unforeseen situations related to technology or natural calamity, the majority cannot do so. How can you successfully cope with a world that is becoming more complex and uncertain? This article at Phys.org speaks about a new approach to enterprise risk management.
Significance of ERM
Public expectations, regulatory demands, and corporate law initiatives have spurred greater attention to risk governance and reporting. Enterprise risk management (ERM) is promoted by several professional organizations and government agencies, including the COSO and ISO 31000 frameworks. The ERM concepts and standards can help firms proactively identify and manage risks and opportunities.
A new research study from Copenhagen Business School evaluates the effects of adopting ERM systems using unique survey data from Denmark’s 500 biggest enterprises. Professor Torben Juul Andersen of Copenhagen Business School’s Department of International Economics and Business says, “We find that pursuing core strategy-making activities is crucial to generating effective results from implementing formal enterprise risk management approaches.”
Risk Management Strategies That Work
The findings show that coping with unpredictable global business settings demands a more profound corporate commitment than conventional ERM systems. According to the research, company leaders and government officials should consider more effective ways of dealing with today’s emerging challenges surrounded by multiple uncertainties and unknown aspects.
Therefore, companies that enable local response and strategic planning to analyze unexpected occurrences outperform those that use formal ERM frameworks.
According to the findings, adherence to ERM principles promises improved performance. However, decentralized reactions and central strategic considerations significantly impact these results. Furthermore, the research urges policymakers to consider how to deal with emerging risk occurrences. The most dangerous of these risks will considerably exceed past estimates and scenarios.
To read the original article, click on https://phys.org/news/2022-01-approach-enterprise.html