The velocity of change in the landscape of threats towards businesses is higher than ever. Scenarios that we all thought to be outlandish just five years ago are daily news today. What does that mean for risk professionals trying to manage enterprise risk – and thereby effectively trying to predict the future? Traditional tools and methods are strained and new thinking is needed.
The Importance of Effective Risk Management
It is imperative that businesses innovate to stay ahead of their competitors and businesses are searching for more efficient ways to understand and mitigate their risks with confidence. New work and new threats are forcing organizations to invest more into risk management in order to create risk awareness and a quantitative understanding of the organization’s risk position. Risk management is certainly not the only space in need of digital transformation:.
The future of risk management is clear. Businesses are turning to automation, deeper, more intuitive analytics, and AI-enabled software to improve process efficiency and better manage risks throughout their lifecycle. These steps will help to ensure that they stay ahead of the game.
Some of the key reasons why businesses are opting for an innovative, digitalized risk management approach are the following:
- Promotes collaboration & aligns the overall business model: When it comes to risk management, time and resources are of utmost importance. Digitalized risk management processes allow teams to communicate and collaborate far more efficiently, providing them with valuable time to focus on different tasks.
- Enhances capabilities necessary to meet regulatory requirements: For many risk and compliance managers, regulatory adjustments mean additional, tedious, work to their everyday tasks. Leveraging cutting-edge technology helps articulate requirements in a more simple and straightforward way.
- Reduces risk exposure: Risks are dynamic and constantly evolving, as such, real-time risk evaluations and assessments are key. To help you plan ahead, actual risk values should be made transparent. This transparency is crucial in allowing you to make informed business decisions and effectively reduce your risk exposure.
What are the changes in people, process and technology that can take your risk management capability to the next level? Rethink risk identification, qualification, quantification and lifecycle:
- Define the context of your risks. Developing a well-defined control framework with detailed policies, procedures, and guidelines, along with a risk bearing capacity and appetite.
- Accurately identify risks through meaningful assessment and centralized data. Use a centralized source of data to identify and assess the threats to your business operations and understand how they affect your business objectives, rather than asking business units to contribute risks that are decentralized, managed across multiple tools, and, in many ways, based on subjectivity.
- Leverage both qualitative and quantitative methods. Qualitative and quantitative assessments should be able to be performed regularly and timeously, without the reliance on external expertise, or against a generic set of criteria. Methods should be available in order to calculate your risks based on their likelihood and impact defined in risk scenarios and data-driven deviations in maturity. This will allow your team to actively work to reduce risk exposure to an acceptable level defined in your risk appetite and enable you to easily prioritize your mitigation measures based on objective insight.
- Review and report on your risk posture at any moment, not just on a quarterly basis. There is a great need to be able to view the most accurate state of your risk posture as you need it, and even better – be able to generate a board-ready report on it. Risks in companies develop continuously and rapidly. Hence, the
- monitoring, evaluation, and reporting should take place continuously, too. With an automated approach, there is no waiting for quarterly reviewing and updating of risks to gain transparency into your organization’s risk exposure.
Enterprise Risk Management will need to transform with the changes imposed on businesses by threats, technology advancements and new ways of teams collaborating. Savvy risk managers will see this as an opportunity to drive their digital transformation agenda and implement risk management of the future.
About the Author
Karl Viertel is responsible for Mitratech’s global GRC business as Managing Director of the business unit. After working in the technology and risk divisions of Accenture and Deloitte, Karl co-founded one of the first RegTech companies – Alyne. In late 2021, Alyne was acquired by the legal and risk software leader Mitratech.