Risk management enables the management of companies to effectively deal with uncertainty as well as all associated risks and opportunities to increase value-add opportunities. In order to maximize value, managers must define a strategy and the objectives to bring growth and earnings targets as well as the associated risks in balance. Beyond that, they must utilize resources efficiently and effectively to follow corporate objectives.
Aligning goals with the risk appetite
Management takes the entity's risk appetite into consideration when evaluating strategic alternatives, defining objectives and developing mechanisms to cope with the associated risks.
Making well-founded decisions
Risk management enables managers to pinpoint and choose adequate actions to avoid, mitigate, share and accept risks.
Entities can recognize potential events better and define responses in advance in order to reduce surprises and the associated costs and losses.
Manage comprehensive risks
Each company faces a multitude of risks that affect various parts of the organization. Risk management enables companies to take effective actions that deal with these comprehensive risks.
By taking an entire range of potential events into consideration, management is able to recognize and proactively utilize opportunities.
Improve capital utilization
By receiving reliable risk information, management can effectively evaluate the total capital requirement and improve the allocation of capital.
Organizations should take any relevant challenges into consideration at an early stage of the enterprise risk management (ERM) implementation. In doing so, they will need to fulfill management expectations while keeping the involvement of the 1st line of defense at a reasonable level. This establishes ERM as a business enabler instead of a necessary burden. This also plays a key role in the ongoing development of risk management, since every step that increases the maturity level should secure the participation and commitment of the management and the 1st line of defense. Securing that the framework is applied in a uniform manner across all affiliated entities regardless of their individual size and culture.
- Manage risks efficiently and effectively as part of a governance, risk and compliance (GRC) concept.
- Save time by creating quarterly and annual reports as well as the underlying workflow automatically.
- Conduct quantitative risk evaluations easily using integrated simulation capabilities.
- Document loss incidents directly in the tool and calculate net risks automatically.
- Use customizable evaluation schema and risk types in the GRC software.
- Incorporate local risk owners with ease.
To adequately implement a risk management approach in line with these steps, companies should deploy a tried-and-tested risk management solution that maps and supports existing processes or provides a method that aligns with common standards, such as ISO. Companies profit from:
- Transparent display of all processes contributing to risk management
- Audit-proof mapping of all transactions
- Automated log files of all user changes
- Views of the risk situation in the desired granularity
- One-click availability of vital information for audits and certifications
- Less work thanks to predefined workflows
Modern risk management lays the foundation for an integrated collection of capabilities, methods, processes and tools that enable organizations to reliably achieve their objectives and cope with uncertainty.