By Harshil Shah, Principal and Head of ERM at Barnett Waddingham
Whilst having proven and wide-reaching benefits for organisations of all sizes across all sectors, ERM is not universally found in all companies. Unfortunately, and often, the catalyst for organisations adopting ERM is often driven by the consequences of a major failure to manage risk or by regulatory requirements.
"However, it should not be viewed as simply a tick-box exercise, but instead a seamlessly integrated process in an organisation’s everyday culture that drives real business value, beyond compliance."
Builds resilience
In a time where the external market is so challenging and unpredictable, staying resilient is arguably more important than ever, and ERM is key to building a resilient organisation. Its proactive, collaborative approach empowers businesses to be more prepared, enables them to adapt to uncertainty and helps them leverage opportunities, especially around complex issues.
ERM uses techniques such as scenario analysis and horizon scanning to help organisations prepare for emerging risks and generate more creative strategies.
Creates a risk-aware culture
ERM increases the focus on risk management at senior leadership level, paving the way for more frequent, transparent conversations about risk across the organisation. This greater awareness of risk management helps companies detect risks at an earlier stage and creates more visibility of where they’re interconnected across different parts of the business.
Increases trust
Implementing ERM demonstrates an organisation's commitment to risk management as an integral part of their business strategy – this builds trust amongst customers, investors, employees, and other stakeholders.
Produces informative metrics
Real value can be created through ERM’s clear reporting metrics, which can help capture, challenge, monitor, and report on misinformation and disinformation.
Its ability to analyse historical trends also means organisations can be more prepared for disruptions that may otherwise be difficult to predict.
Increases efficiency
The holistic approach of ERM gives senior management a clearer picture of the organisation so they can make more informed decisions on things that will increase efficiency, reduce time and money, and ultimately make the business more successful. For example, it can assist with decision-making on resource allocation, budgetary spend, investments in new technology, upskilling employees, and much more.
Greater Business Continuity Management
Business Continuity Management (BCM) is closely interlinked with ERM, as BCM helps to ensure that organisations are continually operating effectively during and after a disruptive event or crisis.
If organisations employ an effective ERM strategy, they will be better positioned to continuously respond and recover from major risks and disruptions.
"If organisations employ an effective ERM strategy, they will be better positioned to continuously respond to and recover from major risks and disruptions."
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