Estimated reading time: 2 minutes
We continue our series on Enterprise Risk Management. If you would like to read our previous article on this topic, please click here.
We previously mentioned risk functions in the preceding article and expound a bit on it here.
In larger working environments, risk functions may actually involve the following:
- Evaluating risks through internal auditing
- Evaluating the quality of products through quality assurance
- Assessing the probability and severity of threats through strategic management
- Ensuring that there are adequate cash flows through treasury management
- Managing probable legal issues with a legal team
- Properly aligning consumer expectations with a fitting marketing campaign
- Identifying and reporting risks through accounting
- Assuring compliance of rules and regulations
The complexities of implementing an adequate (or good) ERM program are wide and do run deep.
There are many issues ahead within any good program and these depend on how the firm is structured and managed.
Some of the issues that may arise include:
- Trying to properly rank potential risks and their respective impacts
- Getting a consensus on what types of risks are necessary to take and when to take them
- Establishing an inventory of risk as well as creating a risk glossary
- Establishing a comprehensive document for risk reporting and monitoring
- Creating the necessary actions needed to mitigate and manage risk
Risk management and associated issues
Many firms all over the world face issues with identifying and managing risks- this is particularly evident sine the 2008 global financial collapse.
Additionally, many of the issues arise within the management methodologies contained within each firm and how they react to varying situations.
It also doesn’t make it easier when one considers the various interplaying between factors such as:
- Geopolitical tensions
- Ongoing mergers and acquisitions
- Technological innovations
- Disruptive inventions
While we live in a world of uncertainty, there are many tools available for firms and their risk managers to use.
ERM frameworks are present and can help guide us through the uncertain financial waters.
It’s beneficial to note that, while the response may vary from one firm to the next, subsequent actions tend to fall near one of the following:
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