Automating Enterprise Risk Management (ERM) for Competitive Advantage
Written By: Sherni Makhijani
The global business landscape is more volatile than ever. From geopolitical tensions, supply chain disruptions, cyberattacks and climate change, etc, organizations face a multitude of threats that can derail their strategic goals. This is where Enterprise Risk Management (ERM) comes in – a structured approach to identifying, assessing, and mitigating these risks. But manually managing ERM across a large organization can be cumbersome and time-consuming. Thankfully, automation tools are emerging to streamline the process, giving organizations a crucial edge in today’s unpredictable world.
What is ERM?
ERM is a framework for managing organizational risk. A comprehensive ERM framework consolidates and improves risk reporting so organizations can identify key risks that may affect them, quantify and manage them better, and implement the proper controls to eliminate or reduce the threat. ERM can also improve human productivity, enhance customer relationships, and improve compliance posture.
Why is ERM Needed?
Traditional risk management often focuses on individual departments or specific threats. This creates blind spots, as risks can cascade and unforeseen issues can arise from the interplay of various factors. ERM offers a comprehensive solution. By taking a holistic and strategic approach. It considers all potential risks across the organization and how they might interact. This big-picture view allows organizations to develop a cohesive risk management strategy that proactively addresses vulnerabilities and safeguards the entire organization’s well-being. Risk management concerns various stakeholders:
- Shareholders: Concerned about financial stability and potential losses from unforeseen events. They ask organizations to implement strong risk management to protect their investments.
- Stock Exchange: They show up in the forms of portfolio diversification, using stop-losses, adding non-cyclicals to the portfolio hedging, investing in dividend-paying stocks, and pairs trading.
- Regulators: Regulators: Enforce industry standards and compliance requirements. They pressure organizations to manage risks associated with legal and regulatory violations. Examples of these in Indonesia include policies by OJK (2015, 2021), Permen BUMN (2022), Menteri Keuangan (2021)
- Economic: economic risks pose significant challenges for organizations, but strong risk management practices can not only safeguard individual businesses but also contribute to a healthier and more stable economic environment.
ERM in Different Industries
Each industry has different types of risks, such as:
ERM and ISO
Enterprise Risk Management (ERM) and ISO 31000 work hand-in-hand to provide a robust framework for managing risks within an organization. While ERM outlines a comprehensive approach to identifying, assessing, and mitigating risks across all aspects of an organization, ISO 31000 offers a set of principles and guidelines to implement that approach effectively. Think of ERM as the “what” and ISO 31000 as the “how.” By following the structured processes outlined in ISO 31000, organizations can ensure their ERM practices are systematic, documented, and continually improved, leading to a more proactive and strategic approach to risk management.
(ISO 31000:2018) The philosophy that risk management is an integral part of change management and other forms of decision-making is based on the understanding that risks are always present and can have a significant impact on the success of any change initiative or decision. By proactively identifying, assessing, and mitigating risks, organizations can increase their chances of success.
While Enterprise Risk Management (ERM) offers a clear path to organizational resilience, implementing it can be a hurdle. Manually managing ERM across a large organization is cumbersome and error-prone. Data collection can be siloed, making it difficult to gain a holistic view of risks. Additionally, communication and collaboration between departments suffer without a central platform. This is where ERM automation comes in. By automating data collection, analysis, and reporting, ERM software streamlines the process, improves communication, and empowers organizations to proactively address risks before they escalate.
ERM Software
Enterprise Risk Management (ERM) software streamlines the complex task of identifying, assessing, and mitigating risks across your organization. Here are the key features to consider when choosing an ERM solution:
- Features with Flexibility of Multi-ERM Frameworks: The software should accommodate various risk management frameworks to suit your specific needs, such as COSO, ISO, and more.
- Quality of Reporting: Robust reporting capabilities are essential for clear communication and data-driven decision making.
- Mobile Device Access: It should be mobile friendly so you can take action from anywhere with mobile accessibility.
- ETL Tools: Extract, Transform, and Load (ETL) tools ensure seamless data integration from various databases in organizations.
- Robust Database: A secure and reliable database is crucial for storing and managing risk-related information.
- User-Friendly Interface: Intuitive design promotes user adoption and simplifies risk management processes.
- Dashboard/Cockpit: You should gain real-time insights and monitor key risk indicators (KRIs) through a centralized dashboard.
- Deployment Model with SaaS or On-Premise: You should be able to choose between cloud-based (SaaS) or on-premise deployment to fit your infrastructure preference.
- High Performance of Software: Smooth operation and fast response times are essential for efficient risk management.
- Local Customer Support: Timely and effective support ensures you get the most out of your ERM software.
Benefits of Automation
Implementing ERM software offers a multitude of advantages beyond streamlining risk management processes. Here are some key benefits that can significantly enhance your organization’s overall health:
- One Platform for Performance Management & Risk Management
- Integrated Risk Management aligned with your Strategy
- Ability to scale and manage risks for all the Departments
- Faster Implementation and Change Management
- Reduced Training and Deployment
- ETL layer to interface with Underlying processes and Business Data
The future of risk management undoubtedly lies in automation. Manual ERM struggles to keep pace with the complexities of today’s business landscape. Relying on spreadsheets and siloed data collection is not only time-consuming and prone to errors, but also incredibly costly. Imagine the man-hours spent gathering and compiling risk data from various departments. Furthermore, manual processes often lack real-time insights, hindering proactive risk mitigation. Automation solves these problems by streamlining data collection, analysis, and reporting. ERM software automates workflows, reduces human error, and provides a centralized platform for risk management. This translates to significant cost savings, improved efficiency, and faster decision-making – all crucial factors for navigating the ever-changing risk landscape. Simply put, manual ERM is simply unsustainable in the long run, while automation offers a future-proof approach to safeguarding an organization’s success.
For more information, please contact: sherni@otiinternational.com
Written By:
Sherni Makhijani
