No business venture is completely without risk. Indeed, any enterprise can expect to contend with potential threats to its operations, employees, customers, or community from multiple sources at a time over the course of its life. The ability to identify salient sources of enterprise risk and effectively mitigate, if not eliminate, the negative repercussions of each is thus crucial for the success of any business. The principles and procedures utilized for the purpose of managing anticipated organizational risks are broadly classified as enterprise risk management (ERM) frameworks.
Most modern ERM strategies have state-of-the-art enterprise risk management software at the forefront. Utilizing such software enables companies to expand their approach to ERM beyond simply pinpointing possible harms and issues the organization is likely to face. The best ERM solutions will enable organizations to build a risk-aware culture across the entire company, make more confident and better-informed business decisions, and systematically achieve company objectives.
The following are some of the most significant ways appropriate ERM solutions can benefit your company:
More Data-Driven and Integrated Approach to ERM
In the past, most companies have tended to execute risk assessment in a top-down fashion, placing risk management-related decisions in the hands of business leaders who have demarcated enterprise risks according to what they’ve observed. Such an approach, however, operates on the basis of limited information that may at times be disconnected from business realities closer to the ground.
In contrast, risk management technology software can extract detailed and reliable information from multiple sources across the enterprise and consolidate this data with ease. These functions enable companies to recognize and classify risks from the bottom up, an approach that makes for a more holistic, facts-based approach to ERM on the whole.
Digital solutions also open doors for companies to integrate ERM processes with other key operations such as performance management, treasury, and finance. Emphasizing the intimate connection these processes have with risk management and collecting risk-related data specifically around them can only enhance the effectiveness of your company’s chosen ERM strategies.
Friendlier and More Digital ERM Processes
Many companies rely on outdated technology and inefficient systems to implement risk management processes, which can severely compromise both operational efficiency and data security. The spreadsheeting applications, websites, and email clients these companies tend to use lack secure risk governance processes and increase the likelihood of data breaches. Using multiple discrete storage applications and reporting tools also fragments the overall data picture, hindering organizations’ ability to recognize and mitigate risk efficiently.
Conversely, cloud-based technology can streamline and simplify ERM workflows and facilitate easy coordination across multiple divisions, locations, and business lines. Migrating your operations to a single digital platform will allow your entire organization to participate, which is crucial for maximizing ERM effectiveness. The easier and more intuitive your risk management solutions are to use, the more engagement you can look forward to from all your organization’s major stakeholders.
Superior Control over User Access and Financials
The right ERM software should give administrative personnel control over user access to an extremely granular degree, allowing them to grant certain users the ability to execute certain functions and restrict them from performing others. These controls not only enhance data security but help clearly demarcate duties among different users and prevent conflicts of interest. The software is designed to automatically monitor all roles that have been provisioned for members of your organization and flag any conflicts that arise so that you can resolve them.
In a similar manner, ERM software is also capable of tracking and monitoring all transactions that pass through a company’s system. It works in real time to uncover and flag data inconsistencies, which can then be forwarded to the appropriate units for investigation. These advanced financial controls allow teams to resolve errors and tag potential instances of fraud more quickly and accurately.
Timely and Flawless Compliance
At the baseline, any legitimate ERM solution should be designed in line with internationally recognized standards and best practices. The software should provide users with a standard set of data analytics that can serve as a stable foundation for any and all of the company’s ERM strategies.
Furthermore, companies invest considerable amounts of time, labor, and resources into satisfying strict reporting requirements from regulators, especially around period close. The high volume of manual work required to meet these requirements not only has compliance teams racing to beat deadlines but also invites errors and inconsistencies in even the most diligently prepared reports. Automating labor-intensive tasks such as data gathering and reconciliation can produce cleaner and more detailed reports at higher volumes and at faster rates, all while minimizing compliance-related risk.
Specific sources of risk to the enterprise and the levels of urgency with which these need to be addressed will naturally vary among individual organizations. What cannot be disputed, however, is that employing the right ERM software can bring numerous benefits to any organization, such as those outlined above. Beyond simply minimizing harm, ERM is a way for organizations to work toward their particular business goals and set themselves up for success.