Why It’s Time to Implement Holistic Risk Management
In partnership with SAP, the Economist and its Intelligence Unit discuss the pressing need for businesses to improve their enterprise risk management systems in the white paper, “Holistic Risk Management: Organizational measures to create a strategic view of risk” available now. With first-hand accounts from key players in several international organizations, it provides insight into how they revolutionized their organizations’ risk management, and offers a compelling argument for the need to adopt a truly holistic, strategic approach to governance, risk and compliance (GRC).
The Heightened Role of Strategic Risk in the Modern World
While risk management has always been a fact of life for business, leaders are increasingly aware of the need to manage new strategic risks driven by rapidly changing marketplaces and unparalleled global connection. With the rise of tech-enabled disruption, the potential for a seismic shift in your sector is always right around the corner, and it could come from anywhere around the world.
Faced with such wide-ranging and potentially catastrophic avenues for risk, you’ll need to start treating risk management as a truly strategic concern—one that becomes a core mission for every layer of your organization, instead of being confined to an isolated silo of Chief Risk Officers or audit management. In that regard you’ll be in good company, as 91 percent of organizations reported plans for revamping their risk management procedures in a 2014 CEB survey.
The Core Tenets of Strategic Holistic Risk Management
As outlined in the Economist white paper, PwC surveys have revealed that top corporate performers have consistently found success by marrying strategic concerns with truly holistic risk management. The steps they’ve taken in meeting that goal are varied, but several core tenets can be used to guide your own efforts in this area:
- Involve your entire organization: Risk management can’t be holistic if it’s limited to isolated silos in your company. Risk arises from multiple angles, and will invariably involve the whole organization. From cyber security concerns to legal and governance issues, there’s no such thing as risk that’s limited to a single team or department. Accordingly, you’ll need to find a way to bring every player into the enterprise risk management conversation.
- Adopt a simultaneous top-down, bottom-up approach: In keeping with a holistic perspective, you need to make risk management a mission priority for everybody in your organization. Rather than being a meta-concern limited to the C-suite, ERM should be a fact of life for everybody on the organizational chart, at every level.
- Equip yourself appropriately: Holistic risk management requires an adaptable, highly responsive organization. This means that sluggish or outdated core operations are now a genuine threat to your very existence. Outmoded paper-driven practices won’t cut it any longer, so it’s time to ensure you’re equipped with technology tools that will allow you to position yourself for managing risk.
The Future of Risk Management
Achieving holistic risk management can help your organization preserve and grow its value, reduce the financial impact of risk, and help you optimize the impact of high-value processes and strategic goals. Truly holistic risk management can also cut your costs by giving you a sound footing to reduce unanticipated risks like compliance violations and supply chain inefficiencies, and will ensure that best practices are embedded in your core business operations. To find out how your organization can reap the benefits of a strategic approach to holistic risk management, read the Economist Intelligence Unit report today.