Profound understanding of the various aspects of Enterprise Risk Management is crucial to anticipate, manage and mitigate risks around your business activities. It is essential to understand the best practices to enhance business performance and ensure success in ERM implementations.
Track and monitor on a regular basis
It is imperative for the leadership team or the management to regularly track and monitor the risks that the organization faces, both internally and externally. This helps to assess, plan and regulate to all risks.
Communicate clearly across the organization
Comprehensible and frequent communication ensures that once key risks are identified and scrutinized, all functional areas from all lines of business are aligned to respond and carry-out responsibilities effectively. It helps the teams classify any emerging risks and respond appropriately to achieve all the objectives.
Get the board’s strong hand
Enterprise Risk Management must be incorporated into an organization’s culture in order to get the most effective results. Support from the board of directors and senior management is vital to make sure that sufficient attention and resources are put in place to ensure success. The board plays a vital role in communicating the importance of risk awareness across the business.
Establish key risk indicators
Establishing key risk indicators (KRIs) to identify risks requires all stakeholders to thoroughly understand the organization’s strategy and objectives. KRIs, such as the analysis of financial results, late payments, etc. are metrics that provide an early indication of growing risk exposure, or emerging events that may lead to risks or opportunities.
Risk management policy in place
A written risk policy is the basis for procedures that are required to implement ERM and communicate the organization’s risk tolerance. It also defines the team’s roles and responsibilities for the risk assessment and risk management processes.
In summary, adhering to best practices will speed up ERM maturity so that the organization can take advantage of opportunities and mitigate potential losses.
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