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Manage Tomorrow's Surprises Today

Steven Minsky

3 Biggest Obstacles to Strategic Risk Management

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Strategic Risk Management

Strategic Risk Management and Enterprise Risk Management are invariably linked. Organizations focusing on Strategic Risk Management (SRM) understand that it's not always an individual risk that results in a loss event, but the failure to adequately account for a number of related risks, goals, or requirements.

Examining the adoption of SRM, Rodd Zolkos of Business Insurance finds a great deal of overlap with the core principals of Enterprise Risk Management. His article, "Interest in strategic risk management grows, as boards push to adopt initiatives," identifies a number of hesitancy preventing organizations from adopting formalized risk management processes, even as boards, ratings agencies, and regulators push for stronger programs.

Among the common challenges faced by businesses implementing Strategic Risk Management - defining a risk appetite, poor internal communications, and tracking measurable results - many, if not all, can be addressed with an ERM Solution.

1. Define a Risk Appetite

A risk appetite is no longer a theoretical concept. Regulations like RMORSA and Solvency II (with more sure to come) require organizations to define levels of exposure with which they are comfortable. Defining a risk appetite by tracking risk assessments, setting quantitative and qualitative criteria, and taking into consideration a risk's unique impact on financial metrics, external relationships, and most importantly, strategic goals, is nearly impossible to accomplish with two dimensional spreadsheets. An ERM software solution will automate the organization of data, taking care of the aggregation so that risk managers can react to trends instead of loss events.

2Improve Internal Communications

Engaging stakeholders is critical to Strategic Risk Management. If employees are unaware of how their responsibilities relate to the big picture, strategic goals remain abstract instead of actionable. The best way to engage employees is by providing them with a tool that accomplishes the more frustrating aspects of their work, like preparing for audits and documenting metrics, so that they can spend more time on the value add activities that make them more productive. Having process owners manage risk is a complex undertaking, but equipping them with tools that prepare their department for audit means risk management will follow suit.

3. Track Measurable Results

What's more important to the board than implementing Strategic Risk Management? Documenting measurable, quantitative results. With flexible reporting capabilities, the right ERM solution allows your organization to measure its progress against industry accepted risk management frameworks like the RIMS Risk Maturity Model, COSO, or ISO. Watch as your organization's risk management program matures, and evolves into a core business competency.

For more information on how Strategic Risk Management can be accomplished with ERM, check out our free EBook on Reporting Risk Management to the Board.

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Steve, concise and right on the mark... we will forward via our social media activities.

Risk Management, not just in a project or on a project basis, needs to be incorporated into the ongoing process of business at all levels, departments and functions... Senior Mgmt too often gives far too little attention to the actual consequences of errors, omission and incorrect information (communication hiccups). The actual cost, not only in money but in lost efficiencies, redirection of resources and damage to reputation and goodwill are not fully considered until... 'the incident happens'!
It is our view that ongoing employee development is one of the strongest steps in the solution, in particular when attached to thorough Risk Management assessment.
The 1st order of business is to make a profit and to do so requires seamless efficiency. This comes with the investment in systems yes, but more importantly in people. As technology levels the competitive playing field, it is people and their performance that become the differentiators.

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In this blog, risk expert Steven Minsky highlights the differences between traditional risk management and true enterprise risk management, which is about helping things happen rather than preventing them from happening. Manage Tomorrow's Surprises Today is designed to help you think about risk in new ways and learn how to benefit practically from this rapidly evolving field.

Steven Minsky

Steven is the CEO of LogicManager, Inc. the leading provider of ERM software solutions. Steven is the architect of the RIMS Risk Maturity Model for ERM, author of the RIMS State of ERM Report among many other papers, and a RIMS Fellow (RF) instructor on ERM. Steven has conducted ERM and RIMS Risk Maturity Model training for hundreds of organizations around the globe. Steven is a patent author of risk and process management technology and holds MBA and MA degrees from the University of Pennsylvania’s Wharton School of Business and The Joseph H. Lauder Institute of International Management. You can reach Steven at steven.minsky@logicmanager.com.

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