When it comes to taking business risks, it’s important to make sure you’re making the right choice.
If you’ve ever worked for a company experiencing rapid growth, you’re probably familiar with the idea that taking risks is the quickest way to grow. Google any successful CEO or entrepreneur and you’ll find quote after quote about the benefits of taking risks in business.
While this advice seems to permeate the conversation around rapid growth, it’s important to remember that not all risks are created equal. Understanding which risks will benefit your company and which could be a hindrance is vital to your company’s success – and there’s no better way to track that than with enterprise risk management.
What is enterprise risk management?
Enterprise risk management may sound complicated, but in reality, it’s very simple to understand. In fact, your company likely participates in enterprise risk management without you even realizing it.
What is enterprise risk management (ERM)?
Enterprise risk management is a business strategy designed to identify, assess, and prepare for any dangers, hazards, and other potentials for disaster that may affect an organization's operations and objectives.
Enterprise risk management is a business strategy designed to identify, assess, and prepare for any dangers, hazards, and other potentials for disaster that may affect an organization's operations and objectives. It's often included in GRC planned.
Enterprise risk management is the process that unfolds anytime a company plans on making a major business decision. It also includes creating a strategy for dealing with risks before they arise and including all the necessary stakeholders involved to ensure your company avoids problems. Think of enterprise risk management as a way to prevent problems before they arrive.
What are some common enterprise risk management examples?
- Financial risks
- Legal liabilities
- Strategic management mistakes
- Accidents or natural disasters
- Data breaches
- IT security threats
These are just a few examples of common risks your company may face. Depending on what industry you work in, there will be different risks you face in your day-to-day work.
Due to the large number of potential risks companies can face daily, many will employ the help of an operational risk management system to help keep their company compliant. This technology allows companies to track, assess, and manage potential business risks.
What is an operational risk management system?
An operational risk management system identifies, assesses, and addresses operational risks across all departments of a company. It’s perfect for anyone working in an industry that doesn’t require specific industry compliance with state and federal law.
|Tip: There are specific risk management programs for healthcare, finance, and IT. These would be more beneficial for those specific industries than operational risk management software.
Operational risk management systems are used to prevent losses that may be caused by different factors such as human behavior, inconsistent processes, or issues related to technology. It can also be used to train compliance professionals and staff on best practices to help prevent compliance issues.
As the world turns more toward technology, it’s important to ensure that your company stays compliant. Using software to enhance your enterprise risk management strategy is one of many solutions you can use for your business.
5 steps for managing risks
Whether or not you choose to use technology in your risk management strategy, you’ll need to be familiar with how to assess and deal with risks. Every risk your company assesses will require a unique perspective and solution. The good news is that you can use the same five-step process for determining and dealing with risks.
Once you become more familiar with the risk management process, you can tailor it to fit the needs of your business. Use the five-step process below as the framework to build your own risk management program.
1. Identify potential risks
The first step in preventing risks to your company is to identify them. Review whatever new project or initiative you’re planning and get everyone in a room together to discuss. What roadblocks could prevent success? What liabilities might you face? Are there any legal troubles this project could cause?
Remember, a risk is anything that could cause harm or hazard to your workplace. These can be financial, technical, or even physical. Don’t leave anything out when considering potential risks.
2. Analyze the risk
The next step is to analyze the risks you’ve identified. Ask yourself how these risks might affect your workplace or employees. Who might be impacted by them? How might they negatively affect your company?
Understanding what problems a risk might cause is just as important as being aware of the potential risk in the first place.
3. Evaluate the likelihood of the risk
After you’ve identified and analyzed the risks, you need to decide on the seriousness of each potential risk. For example, it’s possible that a meteor might fall out of the sky and crash into your event space, but it’s probably not going to happen.
Evaluating which risks are most likely to happen will help prevent them from occurring. Create a list of your potential risks and then evaluate the likelihood they will occur.
4. Address the risk
The next step is to address the risks you’ve established as credible. Ask yourself who might be affected by each risk, what needs to be done to help them, and how your team can ensure you’ve created a safe work environment.
Don’t forget to include anyone in your company that a potential risk might impact. Loop in your finance, HR, and legal teams as needed to assist you in addressing potential risks.
5. Monitor and review the risk
Once you’ve created your risk management plan, you need to monitor it. The workplace is always changing which means you don’t have the luxury of setting and forgetting your risk management strategy.
It’s important to constantly evaluate and update your approach to risk management as your company grows and changes. A good rule of thumb is to review your risk management plan every six months to a year to ensure compliance.
And don't forget to check out free ERM systems if you're just getting your operation off the ground!
Sometimes taking a risk doesn’t pay off
Taking risks is important for accelerated growth, but not if it comes with too great a risk. Remember, each risk has rewards and consequences, and it’s your job to properly assess each.
Looking for an easy way to stay compliant? Identify your company's compliance and security risks using G2 Track.