The primary goal of Enterprise Risk Management is to boost operational effectiveness by improving business processes and mitigating potential losses. The major challenge lies in bringing diverse departments with varied requirements to communicate with each other and share information in a unified system.
In addition to ERM, it is essential for companies to have an effective Crisis Management Plan in place so that the management is prepared, for both the expected and unexpected. An ERM Program and a Crisis Management Plan at all levels of the organization, including the management and board of directors, helps to improve business operations by presenting a risk-adjusted breakdown of profitability. ERM and crisis management are essential to tone down risks and lessen a company’s litigation exposure; in some cases, they are even critical for the survival of a company.
Crisis Management comes into place when an identified or unknown material risk occurs. A crisis management plan is crucial to curtail losses and litigation. It must be able to comprehensively address legal, regulatory and reputational issues in addition several multidisciplinary issues pertaining to public relations and communications, involvement of the board, employees, customers, suppliers, and vendors.
Here are a few handy tips to manage risks and crises effectively within an enterprise:
- Evaluate internal controls, risk management and corporate governance
- Identify common causes of corporate crisis
- Appoint an internal and external crisis response team
- Proactively monitor social media and blogs to gather intelligence on the current scenario, allegations, and facts that may impact the investigative process
- Implement a communications plan
- Develop a crisis response
- In case of crisis, bring an independent investigation to get all the necessary facts
Besides the points listed here, the executive management and the board must create a holistic and substantial ERM process at the executive level to mitigate liability and risk exposure.
It is important to analyze the best practices in crisis management and structure ERM to reap the maximum business benefits and profitability on a risk adjusted basis.
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