Friday, October 14, 2022


Under strong enterprise risk management, people look at the things they essentially do not want to happen.

The business world is increasing in complexity and it is more and more difficult to design fail-proof systems. Risk management is very useful for improving business effectiveness and achieving high performance results with consistency. There are numerous value propositions, it’s the ones selected that influence how risk management gets done. 

The management needs to ponder: Is your market sector volatile or relatively stable? What are the biggest risks in risk management? How to manage risk holistically? Etc. Risk management is not just a tactical task or practice, but a core business capability to run today's complex businesses.

Risk management context aids us in understanding what’s relevant and what’s not:
Risk management is not an isolated discipline, one single team or division’s daily tasks, it is everyone’s responsibilities of the company. Thus, seeing the context you are part of, allows the management to identify the leverage points of the business system and then, choose the decisive factors to improve risk management effectiveness. It’s important to develop effective risk management for integrating all crucial elements such as processes, technologies, tools, talent, communication, culture, etc. to model, manage, and measure risks systematically, make a smooth shift from risk mitigation to risk intelligence.

In reality, too few business enterprises have appropriately aligned or devoted sufficient resources to their risk management efforts. Assuming that in any risk management program, all the known and potential risks would have been covered and managed, and what would be left is what is unknown. The enterprise risk management would be making continuous improvement based on the feedback from the risk management process and reporting structure. They need to be appropriately integrated with optimized processes, the emerging digital technologies, to improve organizational maturity. The value of integral risk management could be in better management decisions, improved operations, greater resilience, improved reputation, increased confidence in management, etc.

It’s crucial to embed risk identification and assessment in operational processes and multiple management disciplines
: Regardless of what methods or indicators are used, the key is to oversee risks in business terms that can really make a business impact. The discipline factor of integrating risk management into the everyday business discipline helps to move the organization a couple of steps forward in improving business effectiveness and achieving business excellence.

An embedded risk management system will identify right down to the lowest level in the business, risk management mechanisms need to be well embedded into varying business factors of the organization. It is not only about risk mitigation or controlling, but being more advanced as risk intelligence. Do not deny the necessity to have clear organizational risk management structures which define individual roles/responsibilities, compliance, internal audit, business processes, quality, environment, safety.

In essence, the goal for risk management metrics and measures is to build understanding on decision support and improve organizational maturity: You can only manage what you measure. Once risks have been identified, each has a risk measurement which tries to be determined and scored objectively. The metrics tell management when something in the business is going wrong; or when something in the business or process can be improved. Metrics also help with creating the sense of urgency, which is important for continuous improvement and a critical step in any business management effort. Broadly speaking, the goal for risk management including quantification is to build a solid understanding of decision support and manage risks effectively.

A lot of discipline is involved on the ground, in streamlining all these metrics and honoring every party's viewpoints to uncover risks continually, and defining a continuously improving process. Risk management needs to make an objective assessment: Do we measure the right things effectively? Did we neglect to measure something important? A company benefits most when it executes enterprise performance management and enterprise risk management in a complementary fashion, as both are critical for achieving the vision and mission of the company.

Risk management is like the brake pad, not for stopping the business vehicle, but for making the vehicle running smoothly with safety control. Under strong enterprise risk management, people look at the things they essentially do not want to happen. The things that would prevent the execution of the strategy or operational plans from achieving the stated aims or that would even make the strategy and operational plans completely obsolete. Solid risk management approach significantly enforces strategy management discipline, improves organizational effectiveness, and maturity.


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