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Enterprise Risk Management

WHAT IS

Enterprise risk management?

Enterprise risk management refers to the process of identifying, assessing, and managing the various risks that an organisation might face in its operations. Enterprise risk management focuses on four main risk areas; strategic risks, financial risks, operational risks and regulatory risks.

WHAT IS

Enterprise risk?

Enterprise risk management (ERM) is strategically important because it enables organisations to navigate a complex and rapidly changing business landscape with confidence and resilience. By systematically identifying, assessing, and mitigating risks, ERM empowers decision-makers to make informed choices that balance potential threats and opportunities, ensuring that strategic objectives are achieved while minimising potential setbacks. ERM enhances stakeholder confidence, safeguards reputation, and contributes to long-term sustainability by fostering a culture of risk-aware decision-making, enabling organisations to thrive in an environment where uncertainty is a constant factor, ultimately leading to competitive advantage and operational excellence.

 

WHAT IS

Enterprise risk management?

ERM refers to the process of identifying, assessing, and managing the various risks that an organisation might face in its operations. This includes both internal and external risks that could impact the achievement of the organisation's objectives. ERM involves establishing a framework to systematically analyse and prioritise risks, implement mitigation strategies, and monitor their effectiveness. The goal of ERM is to enhance an organisation's ability to make informed decisions that balance potential risks and rewards while safeguarding its long-term sustainability.

Master 1 - Infographic 32 - Enterprise Risk Management - R03

WHAT IS AN

Enterprise risk management risk assessment?

Identify Risks

Gather information about internal and external risks that could affect the organisation's goals, projects, processes, and resources.

Assess Risks

Evaluate the likelihood and potential consequences of each identified risk. This evaluation helps in understanding which risks are more critical and require immediate attention.

Prioritise Risks

Rank risks based on their potential severity and likelihood, allowing the organisation to focus on addressing the most significant threats first.

Mitigation Planning

Develop strategies to manage, reduce, or mitigate the identified risks. These strategies could involve implementing controls, transferring risk through insurance, or avoiding certain activities.

Monitoring and Review

Continuously monitor and review the effectiveness of the risk mitigation strategies and make necessary adjustments as the organisational environment changes.

WHAT BENEFITS COME FROM AN

Enterprise risk assessment?

An enterprise risk assessment is typically conducted by the senior leadership, risk management professionals, and relevant stakeholders within an organisation and delivers a number of significant organisational benefits including but not limited to:

Master 2 - Infographic 34 - Enterprise Risk Management - R03
HOW TO CONDUCT AN

Enterprise risk assessment?

Conducting an enterprise risk assessment involves several steps including:

Assess Risks

Evaluate the likelihood and potential impact of each identified risk. Use a consistent and objective framework for assessment. This could involve assigning numerical values to likelihood and impact or using qualitative scales.

Identify Risks

Gather information from various sources to identify potential risks. This can involve reviewing historical data, engaging with key stakeholders, conducting interviews, and using risk identification techniques like brainstorming.

Establish the Scope and Objectives

Define the scope of the assessment, including the areas, processes, and objectives to be assessed. Clearly outline the goals of the assessment.

Develop Mitigation Strategies

For each high-priority risk, design mitigation strategies that outline how the organisation will manage or reduce the risk. These strategies could involve implementing controls, contingency plans, or risk transfer mechanisms.

Prioritise Risks

Rank the risks based on their assessed likelihood and impact. This helps in focusing resources on addressing the most significant risks first.

Resource Allocation

Determine the resources (financial, human, technological) needed to implement the mitigation strategies effectively.

Implement and Monitor

Put the mitigation strategies into action. Continuously monitor the effectiveness of the strategies and adjust them as needed. Regularly review and update the risk assessment as the business environment evolves.

Communicate and Report

Clearly communicate the outcomes of the assessment to relevant stakeholders, including senior management, board of directors, and employees. Create concise and informative reports that highlight key risks and mitigation efforts.

Integrated into Decision-Making

Embed risk management into the organisation's decision-making processes, operations, and strategic planning. Make risk awareness a part of the organisational culture.

Continuous Improvement

Periodically review and refine the risk assessment process. Learn from past assessments and adjust the methodology and criteria as necessary.

Training and Awareness

Educate employees and stakeholders about the importance of risk management. Foster a risk-aware culture where individuals understand their role in identifying and addressing risks.

Strategic risks

Financial risks

Business viability risk

Climate risk

Commercial risk

Corporate transaction risk

Geographic risk

IP protection risk

Key human resource risk

Leadership risk

Partnership risk

Product and market fit risk

Product viability risk

Reputational risk

Resource risk

Investor risk

Access to capital risk

Bad debtor risk

Cash management risk

Commodity risk

Currency risk

Debt financing risk

Enterprise valuation risk

Financial liability risk

Financial management risk

Financial viability risk

Funding risk

Interest rate risk

Liquid asset risk

Loan repayment risk

Revenue management risk

Tax event risk

Operational risks

Regulatory risks

Business operations risk

Business outsourcing risk

Culture risk

Distribution risk

Employee risk

Environment risk

Human error risk

Employee/industrial relations risk

Information security (cyber) risk

Information technology risk

Intellectual property risk

Employee retention risk

Leadership risk

Legal risk

OH&S risk

Project execution risk

Record keeping risk

Supply chain risk

Bad weather event risk

Bribery and corruption risk

Fraudulent activity risk

Illicit trafficking risk

Money laundering and terrorism financing risk

Sanctions risk

Strategic risks

Business viability risk

Climate risk

Commercial risk

Corporate transaction risk

Geographic risk

IP protection risk

Key human resource risk

Leadership risk

Partnership risk

Product and market fit risk

Product viability risk

Reputational risk

Resource risk

Investor risk

Financial risks

Access to capital risk

Bad debtor risk

Cash management risk

Commodity risk

Currency risk

Debt financing risk

Enterprise valuation risk

Financial liability risk

Financial management risk

Financial viability risk

Funding risk

Interest rate risk

Liquid asset risk

Loan repayment risk

Revenue management risk

Tax event risk

Operational risks

Business operations risk

Business outsourcing risk

Culture risk

Distribution risk

Employee risk

Environment risk

Human error risk

Employee/industrial relations risk

Information security (cyber) risk

Information technology risk

Intellectual property risk

Employee retention risk

Leadership risk

Legal risk

OH&S risk

Project execution risk

Record keeping risk

Supply chain risk

Bad weather event risk

Regulatory risks

Bribery and corruption risk

Fraudulent activity risk

Illicit trafficking risk

Money laundering and terrorism financing risk

Sanctions risk

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