The risk management landscape has become increasingly intricate and multifaceted, with businesses continuously evolving. A recent Accenture study points out a considerable strain on businesses regarding risks, with 83% saying that complex and interconnected risks are emerging faster than ever. Taking on risks today requires robust enterprise risk management. One that helps organizations proactively evaluate the potential impact of particular risks and implement suitable measures to mitigate resulting losses.
What is Enterprise Risk Management (ERM)
ERM is a systematic process to identify, assess, prioritize and mitigate various potential risks. It aims to achieve strategic business objectives by addressing multiple risk categories: financial, operational, strategic, cyber, credit and third-party risks.
Research indicates that organizations with effective ERM programs typically observe a significant decrease in the frequency of risk events, averaging around 63%. These companies also report up to a 35% reduction in operational losses.
In this context, ERM tools provide the essential framework for collecting, assessing, and presenting risk-related information. By offering proactive insights, they help in decision-making by enabling organizations to foresee potential risks before they manifest.
Top ‘must-have’ features in an ERM tool
A good ERM software should be able to integrate various risk management aspects seamlessly and offer a holistic platform for businesses navigating uncertainties. There are many options for ERM tools in 2024, but here’s what to look for while shortlisting them.
Centralized Risk Repository: A centralized risk repository helps foster a common risk language across the organization, ensuring consistency and transparency.
Standardized Risk Assessment: Enables uniform risk identification and mitigation strategies.
Advanced Analytics: Provides real-time insights into the risk landscape, automates risk monitoring, identifies patterns, and predicts threats, facilitating informed decision making and enhancing operational efficiency without additional personnel.
Advanced Visualization and Reporting : Transforms complex data into understandable insights with interactive dashboards and Performance Analytics, providing deep analytical insights for proactive and informed decision-making.
Configurable Capabilities: Offers customizable risk assessment, self-assessment design and scheduling based on maturity levels, incident tracking, and reporting functionalities for comprehensive risk management.
Unified Risk Viewpoint: Provides a holistic, real-time perspective on risks, fostering collaboration, scalability, and visibility across teams, offering insights into top risks, trends, and risk appetite.
Intelligent Issue Management and Evaluation Tools: Driven by Artificial Intelligence (AI) and machine learning, these tools automate risk assignment, grouping, remediation suggestions, and offer detection, evaluation, and monitoring to identify and neutralize risks pre-emptively.
User-Friendly UX/UI Design: Ensures a user-friendly interface and intuitive user experience, enhancing usability, adoption, and overall effectiveness of the ERM tool.
Regulatory Compliance: Ensures regulatory compliance by offering built-in frameworks, controls, and workflows aligned with industry standards.
Comprehensive Risk Statement Library: Incorporates a library for consolidating ratings and reporting through a common risk taxonomy, enabling effective communication across different departments.
Enables a Connected GRC Strategy: By integrating GRC across the organization a connected GRC strategy enables organizations to harmonize risk assessment with mitigation efforts efficiently.
Automated Incident Response: Supports Automated Incident Response by intertwining risk management with incident response, automating the management of security standards to ease the administrative burden on teams.
Vendor Risk Assessment: The software enables organizations to identify and mitigate risks associated with third-party relationships.
Support for Security Standards: The software supports frameworks such as ISO 27001 and NIST, aligning security policies and controls with industry best practices.
Modern Graph Database: This feature facilitates dynamic connections between risks, controls, business units and owners, enhancingreporting speed and adaptability of the risk management program.
Quick-start Features: Offers pre-configured risk scoring and guidance for assessing inherent and residual risk ratings. This simplifies the initial setup and ongoing management of risk assessments.
Risk Quantification: Provides risk quantification simulations offering executives a clearer understanding of risk impacts in tangible monetary terms.
To sum it up
In 2024, it is evident that the trajectory of Enterprise Risk Management goes beyond just navigating uncertainties. It is now about thriving within them. A robust ERM program, supported by a technology-based software solution, can improve an organization’s visibility into existing and emerging risks. A robust ERM program also helps an organization build trust and confidence with the board, regulators, investors, and other stakeholders by demonstrating a proactive approach to identifying and mitigating risks. Therefore, organizations must review their ERM programs with the right features to not just manage but thrive on risk.
The article has been written by Shankar Bhaskaran, Managing Director, India, MetricStream
