Each day as we read the news across the globe, it is apparent that the business environment continues to be laden with a myriad of risks. Without advance preparation, companies looking to advance their strategies will find themselves at the mercy of some unforeseen event that will threaten their success or perhaps their very survival. In times like these, it is critical to have a strong enterprise risk management ("ERM") program that is woven into the fabric of a company's strategy as well as its day-to-day business operations.
However, implementing an effective ERM program today is no easy task. Faced with an uncertain regulatory and economic outlook, many companies struggle to create a cost-effective, focused program that will provide the necessary insight to anticipate the most critical risks. While each company and industry may be unique, there are a few common steps that can be taken that will lead to a more effective ERM program.
1. Start with the strategic plan - focus ERM efforts on where the company is going, not where it has already been
2. Create a simple framework and process that is easily understood - too many companies try to make ERM more complicated than it needs to be
3. Demonstrate importance of the program with a C-level champion - whether it is a new Chief Risk Officer, the CFO or even the CEO, a key leader must lead the charge
4. Tie risk management objectives and metrics to existing performance metrics - business goals require incentives and risk management objectives are no different
5. Invest in cost-effective enabling technologies - a wide range of risk management technology solutions exist today and choosing the wrong solution can result in cost overruns and poor results
By taking these steps, you will certainly be headed in the right direction on your ERM journey. However, the ultimate success factor is maintaining a long-term commitment to ERM as a valued business discipline.