Risk management and how it can generate tangible value for companies
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.
Established risk management processes help companies achieve the objectives that drive success
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.
What is important to keep in mind with risk management?
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.
Is risk management software necessary?
An ERM can be built, for example, in solutions based on Microsoft Excel. Once the process reaches a certain size or level of complexity, however, this approach becomes very complex and highly prone to error. A professional risk management tool, in contrast, avoids duplicate work, saves time and delivers insightful reports that generate real value and serve as a basis for enterprise management and decision-making. Our software BIC Enterprise Risk enables organizations to build a future-proof, efficient management system.
- 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.
Advantages of risk management software
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.
The significance of risk management has grown dramatically in recent years
Globalization, the changing requirements of increasingly deregulated markets, and mounting pressure to lower costs have revealed a clear need for a structured approach to risk management in many organizations. Regardless of their intrinsic motivation, companies can utilize existing risk management regulations as guidance:
- National legal requirements such as BilMoG, KonTraG (D), OR (CH) and URÄG (AT)
- Capital requirements for banks (Basel II) with specifications on credit checks, rating procedures and lending activities
- Rules and policies on corporate governance in organizations such as the German Corporate Governance Codex (DCGK)
Viewing individual risks in isolation no longer suffices to fulfill the various legal and internal requirements of today’s companies. An integrated approach provides far greater benefits by enabling a holistic view of risks, embedding risk management in enterprise management, and clearly aligning with corporate goals.
Companies can fulfill this vision through a risk-driven approach that is rooted in their corporate culture and institutionalized through risk management software. Employee commitment is hereby essential to implement the developed risk management processes and truly live them in everyday business.
An integrated approach to risk management releases new potential to add value
To cover the comprehensive demands on risk management, companies need a broader approach that is anchored in the corporate culture as a solid framework. This ensures that risk management releases its potential for increasing value by enabling companies to take more risks through greater control over them. Despite these insights, many companies still work with isolated solutions, which lead to a variety of problems. In particular, these silos hinder an enterprise view of all relevant risks and effective ways to deal with compliance and operational risks. An integrated approach, in contrast, closes the gaps between compliance and risk management processes, reduces duplicate work, and enables a comprehensive view for management. Contemporary approaches to risk management driven by risk management software empower companies to establish strategies for building profit and value while transforming their view of risk from a potential danger to an opportunity for strategic growth. Risk management software supports this process throughout the following steps:
Risk identification is a key task of the process since each non-identified risk poses a threat. Identified risks are generally aggregated by risk types or fields for easier processing.
Risk management software provides various qualitative and quantitative methods for risk analysis such as self-assessments or Monte Carlo simulations. Quantifying risks is the foremost objective of the risk evaluation.
Companies can use various measures to control risks depending on their nature and urgency:
- Avoiding risks that pose a grave threat
- Reducing the probability of a risk's occurrence
- Transferring or sharing risks (e.g., through insurance or partnerships)
- Accepting risks that only pose a minor threat when their reduction is not economically feasible
Integrated reporting is necessary to ensure effective risk management. These reports, which stem directly from the software, ensure on-going checks of processes and measures and enable a complete risk overview for management.
Which risk management software is right for me?
Whether you prefer a custom design or pre-built solution, GBTEC offers the right software for your needs.
See for yourself and discover our BIC GRC Solutions for professional risk management.
BIC Custom GRC
BIC Custom GRC offers customizable, flexible custom solutions that can be tailored to the client’s unique processes.
BIC Enterprise Risk
BIC Enterprise Risk is our intuitive, fast-to-implement standardized solution that fulfills leading standards.
Software for beginners and professionals: Make full use of the potential in risk management
Professional risk management creates the foundation for your successful GRC strategy. Start with BIC Enterprise Risk and expand your digital governance, risk and compliance processes step by step with BIC - in risk management and all other GRC areas.
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