MAL51 MAL51:22 | Page 80

framework is to assist the organization in integrating risk management into significant activities and functions .

The effectiveness of risk management will depend on how well it is incorporated into organizational governance , including decision-making . Support for this is needed from all parties , especially senior leadership . The development of a framework includes integrating , planning , putting into practice , assessing , and enhancing risk management throughout the organization .

The organization needs to assess the effectiveness of its current risk management procedures and practices , identify any gaps , and fill those gaps within the framework . The framework ’ s components and their interactions should be customized to accommodate the organization ’ s needs .

The risk management process entails applying rules , procedures , and policies systematically to the activities of communicating and consulting , defining the context , and assessing , treating , monitoring , reviewing , recording , and reporting risk .

The risk management process should be integrated into the organization ’ s structure , operations , and decision-making processes as well as management . It can be used at the project , program , or operational levels . Within an organization , the risk management process can be employed in a variety of ways that are tailored to specific goals and the internal and external contexts in which they are used . Despite sometimes being depicted as sequential , the risk management process is actually iterative .

Where applicable , top management and oversight authorities should make sure risk management is included into all organizational activities . They should demonstrate leadership and commitment by : customizing and implementing all components of the risk framework ; issuing a statement or policy that establishes a risk management approach , plan or course of action ; ensuring that the necessary resources are allocated to managing risk ; assigning authority , responsibility and accountability at appropriate levels within the organization . Among other advantages , this oversight role will assist the organization in coordinating risk management with its objectives , strategy , and culture .

Governance guides all the directions of the business , its interactions with both internal and external parties , and the procedures , policies , and practices required to carry out its objectives . The strategy and related objectives needed to attain desired levels of sustainable performance and long-term viability are translated into management structures from governance direction . The governance of an organization includes defining who is responsible for risk management and what oversight responsibilities exist .

Why should we integrate risk management with strategic management ?

An effective risk management program gives visibility into the range of risks that may have an impact on how well an organization can carry out its objective , which is frequently stated in a strategic plan . Consequently , the strategic planning process is the perfect place to discover and in some situations , respond to a surprisingly underappreciated kind of enterprise risk : strategic risk .

Business success depends on combining corporate strategy and risk management to make wise and informed risk decisions in the age of extreme volatility , uncertainty , complexity , and ambiguity . Ignoring or ineffectively managing the risks connected to a strategy is a surefire way to fail .

It is possible for an organization to identify and assess how a wide range of potential events and scenarios will affect the execution of its strategy , including their ultimate impact on the achievement of set objectives , thanks to risk management ’ s top-down and holistic approach to effective risk management for the entire enterprise . The organization will be best positioned to create and enhance sustainable value by incorporating enterprise risk management in strategy formulation and strategy execution capabilities .

The capacity for the organization to seize risk opportunities with the potential to boost returns for the business or identify areas where it is overly risk averse is made possible by taking into account risk during the process of developing and implementing a strategy .

Business opportunities and dangers could go unnoticed if risk decision-making is not coordinated with strategic decision-making procedures . It is crucial that the board and top management fully comprehend the organization ’ s multiple value drivers and the various risks that surround them . Having this knowledge facilitates developing and putting into practice strategies that can advance the organization .

Organizations that were successful in

Integrating Risk management with strategy

For risk management architecture to have any relevance to the organization , senior leaders must ensure that they make risk management a part of all processes and practices and also develop an organizationwide risk management plan - all of which resonate with the strategic management components . Incorporating risk management into strategic management entails much more than just doing a strategic risk assessment or even having a risk talk at the strategy-setting meeting .

Managing risk is about exploiting opportunities as well as minimizing threats . As earlier mentioned , an organization will first have to acknowledge that during the strategic planning stage there will be risks from the internal and external environment that help determine which goals and objectives to choose in the first place . It will be essential to monitor the risks that could hinder the company from reaching the goals and objectives outlined in the Plan while implementing the strategy . Assessing and reducing risks that result from putting your strategic plan into action is a crucial step that is sometimes skipped . These risks are typically brand-new ones brought on by the strategy ’ s implementation or unforeseen effects of success .

There is a process involved in identifying corporate risks to strategic goals . Management should first establish the main assumptions that underpin the existing strategy ’ s effectiveness in order to uncover these undiscovered threats . First , it is critical to ask , “ What needs to go right for a strategy to succeed ?” These assumptions include , but are not limited to , trends in customer preferences , brand awareness , skill sets , regulations , financial accessibility , rivals ’ capabilities , current technology , and the capabilities of third-party service providers . The next phase in the process is to create contrarian statements that invalidate the assumptions . Finally , management should create an implications statement that aims to pinpoint developments or events that could make the assumptions invalid and then develop a response to that event .

In the earlier part of this article , I indicated that risk appetite has an important part to

80 MAL51 / 22 ISSUE