Why ERM tools are essential to manage risk for business success
No matter what your business goals are, enterprise risk management can help you achieve them. Although every company practices risk management in some way, a formal ERM process puts methodologies and practices in place so you can systematically increase your chances of success. In the absence of risk management, a company is more likely to make poor decisions, be less prepared, and struggle to consistently meet their business goals.
If one thing has become abundantly clear over the past two years, it’s that companies have no choice but to plan for the unexpected. Companies have been severely tested by a range of issues, including insufficient employee protections, supply chain deficiencies, and financial unpredictability, underscoring the need for agile, flexible, data-driven ERM.
For example, security is always a concern, but it took on a new and refocused urgency as businesses enforced work-from-home mandates. The sudden move left many companies scrambling to adapt their onsite protocols to offsite equivalents that would continue to protect the business and its employees from a wide range of concerns including insider threats and financial fraud, while addressing data privacy, IP protection, cash preservation, and statutory compliance.
While most companies focus on innovation and growth, only resilient companies are successful over time because their business strategies also address risk and preparedness. The best business plans are those that can quickly pivot in response to evolving markets, business models, and regulations. For example, companies with modern risk management systems that include automated audits and security monitoring can continue to perform those tasks remotely—even across international borders. This enable them to operate smoothly despite travel restrictions, and it drives a level of efficiency and cost savings that they will benefit from long after the crisis is resolved.
Creating the right enterprise risk management framework
ERM is a business process with specific steps, milestones, and stakeholders. A reliable and effective ERM framework is based on committed stakeholder involvement and supported by substantial, actionable data and robust intelligence.
Your ERM framework’s purpose is to help you identify, assess, and analyze key business risks—and minimize negative business impacts if those risks come to pass. The ERM framework must be context-driven and modeled across all lines of business, as different functions are vulnerable to different types of risk and at different levels. Finally, ERM must consider both internal and external risks and consider how those risks can also create opportunities.
For example, if you’re entering a new market or acquiring a new company, you’ll want to apply risk modeling to understand potential impacts across every business unit and function. Robust data analytics, AI, and machine learning (ML) can help you create scenarios and models that pinpoint not only the potential for harm but the potential for business growth.
How are cloud technologies and analytics changing enterprise risk management?
Technology is transformative within the ERM arena, just as it is in so many other enterprise processes. Technology accelerates the power of enterprise risk management in three essential ways.
1. It makes the process more data-driven. Historically, risk mitigation has been very top-down, emanating from company leaders who have specified the enterprise risks, as they see them. Technology offers a bottom-up, data-based ability to classify existing risks and identify new risks based on reliable information. This capability is a game changer. Not only that, the more you integrate ERM into your existing processes and collect data around those processes, the more powerful your risk management will be.
2. It makes the process friendlier and more digital. Cloud technology enables simple, but secure workflows that unify and coordinate activities across lines of business, locations, and functions. Many organizations still rely on spreadsheets, websites, and email for their risk management processes. This absence of secure risk governance processes hampers an organization’s ability to identify and plan for risks and creates opportunities for data breaches. In contrast, transitioning to a digital platform, such as cloud risk management, significantly increases ERM effectiveness and allows the entire organization to easily participate, which is essential for success.
3. It makes cybersecurity an enterprise-wide concern and a top priority for the C-suite.Technology has driven an explosion in data and an increasingly remote workforce, which has led to the growth in the severity and frequency of cyber threats. Organizations are also facing stiffer expectations from financial regulators when it comes to securing their digital defenses. For most companies, a proactive risk management strategy that continuously monitors user access and activity should be the next step in their cybersecurity journey.
What to look for in an ERM solution
When you’re ready to bring technology to your organization’s risk and compliance efforts, look for a purpose-built ERM solution that can give you the following features:
- Simplicity. First and foremost, your ERM solution must be easy for all stakeholders to use. This is crucial because you must have multistakeholder engagement to be effective. ERM is not a standalone process. It must be deeply integrated with your existing systems so you can easily reach all the decision-makers in your organization, and they can easily provide ongoing input.
- Integration. An ERM program and technology implementation cannot be isolated and separated from the rest of the organization. Siloed risk management software often fails to reach and influence other stakeholders. In this situation, ERM is simply a procedure with no collaboration, impact, or systemic adoption―all of which are essential to success. Instead, aim to build a culture of risk awareness across your organization.
- Engagement. When you’re considering a risk management solution, evaluate the solution’s potential for engaging all stakeholders throughout the organization. This is your key deciding factor. Choose a solution that’s intuitive and easy to use so that people will use it. Though digital risk management is based on technology, its real success is rooted in engaging both frontline and organizational leaders so that it becomes part of everyone’s daily responsibilities and decision-making, both small and large.
- Standards and best practices. Any ERM solution should embody global ISO standards and best practices and include a standard set of analytics to get you started.
When ERM becomes part of the fabric of every system
When your ERM solution is completely integrated into your finance, HR, and supply chain systems, you can model various problems, events, and possibilities across the business for potential impacts and opportunities. This enables you to monitor the entire business, flag risks, and create plans to mitigate them. Organizations that lack a proactive risk management strategy are going to be reactive and enter crisis mode when disruption occurs.
How a strong risk management framework can protect you
What are the benefits of an enterprise risk management solution?
The standard characteristics and benefits that the cloud delivers are a natural fit for ERM solutions: faster to deploy, far more secure, and always on. In the context of ERM events, such as system downtime or business disruptions from internal or external forces, an always-on infrastructure is essential to protecting your business and keeping you up and running.
Moreover, collaboration is crucial for effective ERM deployment. Collaboration in the cloud is much easier than in a non-cloud environment.
Additionally, with the cloud, creating effective risk management solutions isn’t a multiyear project requiring huge investments of resources and time. Instead, risk management cloud solutions can be deployed quickly―often within days. That means you can move fast and start to reap the benefits immediately.
What is the future of enterprise risk management
For so many enterprises today, ERM is a disconnected and separate set of activities that fail to take advantage of the latest technology to help with crucial, risk-related decision-making. It doesn’t have to be that way. Digitized technology and the cloud together offer an integrated, fluid platform that everyone can easily engage with―to the greater benefit of the organization.
In the future, ERM will be much more pervasive and data-driven, becoming an integral part of every decision and process. Using robust data, AI, and ML to drive your ERM not only helps you better identify risks, it also makes risk management a part of every activity across the organization. In this iteration, ERM becomes the fabric of everything everyone does.
With AI and ML embedded into an ERM cloud solution, you can continuously monitor for suspicious activity in your core business processes, stop insider threats, and coordinate preparation and responses. Your solution will bubble up that information through dashboards designed specifically for your stakeholders so they have easy access to insights and analytics. From assessment to recovery, your solution should take a holistic approach that helps you keep mission-critical operations going, whatever risks come your way.
ERM isn’t just about minimizing harm—it’s a way to help organizations meet their broader goals and increase their chances of success, despite the risks.
Why cloud ERP and risk management are a winning combination
Business leaders understand that uncertainty and disruption will always exist. We can’t always predict the next social or environmental driver, disruptive new business model, or emerging competitor—but we can control our responses and act quickly. This is where a modern approach to ERP and risk management elevates a company’s ability to sustain itself and make bold decisions with confidence. Having a risk management solution fully embedded within your critical ERP business processes gives you the right framework to grow, comply, and stay secure. Additionally, built-in advanced controls and automation allow you to:
- Automate monitoring and control of user access
- Continuously monitor user activity with AI
- Simplify financial reporting and compliance