You know that today’s business environment is more complex and volatile than ever before – it’s a reality you work within every day. But, what are you doing about it? How are you proactively safeguarding your business today, and ensuring prosperity tomorrow?
An increasingly unpredictable and dynamic business environment demands the development of a clear Risk Management strategy.
Yet, how does one predict and prioritize the emerging areas of Risk Management that demand your focus? What are the most important trends you should look out for?
Luckily, we’ve combined some research with our extensive experience in developing and delivering Enterprise Risk Management (ERM) software and strategies to your advantage. Here are five trends you need to consider when updating your approach to Risk Management in 2017.
1. Ownership of Risk Management is changing
The ownership of Risk Management is changing – again.
Before the Global Financial Crisis (GFC), front line managers were chiefly responsible for risk detection and accountability. The GFC changed that, with many enterprises pulling Risk Management responsibilities back up the chain of command – from operational, to middle and senior level managers. This conservative approach was as much a symbol, as it was a representation of common sense: Organizations everywhere wanted to avoid experiencing GFC-like repercussions ever again, while simultaneously demonstrating changed risk appetites and strategies to stakeholders.
However, it appears that many organizations are beginning to rediscover the significant role front line managers play in the initial identification and avoidance of risk. At the same time, organizations are also readjusting the Risk Management role of senior managers. Many senior managers are now spending more time influencing risk-related strategic decision-making, rather than focusing on the prevention and treatment of operational level risks.
PWC’s recent study, Risk in Review 2017: Managing risk from the front line for greater resiliency and growth, demonstrates the point. While only 13% of front line managers currently lead risk decision-making and collaboration, 46% of surveyed organizations plan to move more Risk Management responsibility to front line managers over the next 36 months, with 63% agreeing that “moving risk decision-making to front line managers makes [their organization] better at anticipating and mitigating risks”.
2. Organizations realize the value in cultivating a strong risk culture
In 2017, management teams – across all major industries – are realizing the benefit of cultivating a strong risk culture within their companies. Whilst this trend is undoubtedly positive, it begs two major questions: Firstly, what are you doing to establish and grow Risk Management as a priority within your organization? Because, in this competitive climate, being left behind by industry peers who are prioritizing Risk Management is a risk in itself. Secondly, how do you plan to foster strong risk awareness? What are the specific things you need to enact to actually make Risk Management a cultural priority?
Creating strong risk culture and habits means more than just having a system in place to identify and control potential organizational risks – though the right tool for the job is an inescapable must. Identifying which employees work in positions that are both exposed to, and have the opportunity to mitigate, risk is imperative. From there, providing appropriate training to those employees on how to protect themselves, as well as the organization, from threats associated with their job – from IP theft, to data loss, occupational health and safety hazards and more – is critical. The next crucial step is to establish and actively promote methods for communicating, reporting on, and addressing risks throughout the business. This is where embracing the right Risk Management software comes in.
Translating a solid Risk Management strategy, culture and framework into practice – in order to achieve real business change – demands a centralized system of record. That is, one place where the right people can document, measure, treat, monitor and report on all existing, potential and future business risks in a manner visible to all stakeholders. That system also needs to support clonable workflows, in order to automate repeatable Risk Management practices and processes, coupled with trigger-based alerts and scheduled reporting to ensure you’re always on top of known and emergent risks.
3. The emergence of collective Risk Management
Nowadays, businesses and people are more connected than ever before. The modern organization is producing and capturing more data and business outputs, with people also communicating more of that information more often via a swathe of new communication platforms. Simply put: we produce and share more insights in the workplace than at any other point in time.
It’s this culture of constant communication that Risk Managers should tap into when developing Risk Management solutions and strategies. A greater proportion of people in the workplace – particularly in front-line operational roles – are now equipped to convey experiences and outcomes that can help form Risk Management controls, contingency and mitigation plans.
This environment means managing risks will become a more collective process in the near future, with Risk Management processes themselves being transformed through more open and collaborative approaches to business communication. But, this new reality will introduce new challenges too. So how are you preparing to take advantage of your increasingly networked business environment, in order to identify, manage, control and reduce risk?
4. Integrating Risk Management into other business processes
Risk Management is now being integrated into more business processes. Many organizations have started recognizing the value new and multiple data sources – both internal and external – can play in developing, monitoring and managing risk.
Advancements in cognitive technologies, artificial intelligence, and data analytics are helping organizations go past the old-fashioned ways of managing risks within a single business process. Instead, they are now allowing sharing of data between different business functions and departments.
Today, you can find specialized Risk Management tools in the market that can be embedded in multiple functions and departments, drawing on insights from those various business areas and the data they generate, in order to streamline the entire process of Risk Management within an organization. Integrating Risk Management across multiple business processes will also allow management to look at risks from a holistic point of view; rather than treating them in isolation. In turn, this will ensure strategic alignment of risk mitigation actions throughout the business.
At the same time, this trend will enable uniformity in the management of risks, and consistency in the application of Risk Management frameworks, among all business processes.
5. Risk Management becomes a performance enabler
In the past, Risk Management has been an exercise undertaken in fear – used as a tool to address compliance-driven tasks and activities. In short: To meet obligations and protect the organization. But, that viewpoint has started to change. Forward thinking managers are beginning to view Risk Management as an opportunity to create value and drive organizational performance and, thus, Risk Management is being reimagined as a performance enabler.
A major driver of this changed perspective is that risks are becoming more measurable. Organizations are able to determine an accurate value for effectively addressing risk. From there, more appropriate risk appetites and associated levels of risk-taking behavior can be developed in order to balance risks and rewards.
Further, management teams are now also looking at ways of incentivizing good risk behavior – just as they would for other performance-driven areas of the organization, such as sales – and rewarding employees for meeting and improving Risk Management KPIs.
Looking for a risk management software that helps you manage & review risks efficiently?
With over 20 years’ experience in Risk Management, we have the expertise, resources and experience to meet your unique risk objectives.
Recognized as a Cool Vendor in ERM software by global analyst firm Gartner, CAMMS has tens of thousands of users across five continents.
Our Risk Management solution, cammsrisk, is built to comply with international standards, such as ISO 31000:2009 and the COSO framework.