In applying ERM, firms not only come to grips with risk, they may also identify potential red flags in the organisation and shortfalls that need fixing.
In addition to all this, they may become better able to recognise emerging risks as well as potential opportunities. It cannot be denied that there is much more sharing of information among industry players nowadays; word about the effectiveness of ERM gets around, particularly when the profession itself is supported by accreditation and international standards. Having internationally-recognised standards goes a long way towards acceptance, as there is always a reliable reference and usually a network of experienced professionals to seek advice from. These help to provide important perspectives of factors affecting enterprise risk management that may not be obvious to risk managers who are “too close” to it.
The world is changing, and businesses know that they too must change – or die. Globalisation is accelerating the adoption of standards, and there is a growing need to urgently conform to accepted best practices, the world over. Firms that cannot do this quickly or effectively enough, stand to lose out in terms of competitiveness and sustainability. This may be the strongest factor that is accelerating the adoption of ERM worldwide. Risk professionals know that ERM tools don’t just manage risks, they identify opportunities as well, and businesses today need all the help they can get in this area. ERM helps the organisation take a proactive stance, which is imperative to seizing opportunities.
Being proactive helps the organisation mature, and further integrates ERM with its systems, processes and procedures. The firm thus becomes better at managing risks, mitigating them and identifying emerging ones that may derail the business. All businesses will need to take risks at one time or another. With the right ERM frameworks in place, they will have the necessary information to make the right decisions that will turn risks into opportunity, improve business performance, and enable them to continue creating value in the long term.
5 The IERP® Monthly Newsletter September - November 2021