Enterprise risk management (ERM) is a systematic framework for identifying, assessing, and mitigating organizational risk.
Understood broadly, organizational risk encompasses all factors that have the potential to endanger an enterprise, whether these are internal (such as data privacy and security breaches, equipment malfunctions, and similar factors) or external (such as natural disasters, political upheavals, market failures, and similar factors).
What conditions qualify as risk and what types of risk are most relevant to address will vary from entity to entity. Within any organization, however, ERM necessarily involves setting in place company-wide strategies to either avoid pressing risks or to minimize their inevitable effects.
ERM solutions thus not only alleviate any potential harm that may befall an organization but also, in so doing, allow the entire organization to meet its goals and improve its performance.
Modern ERM approaches rely heavily on risk management software to more efficiently report on and respond to risk on a wide scale.
Digital risk management tools often come with a large array of functions aimed at addressing different types of enterprise risk.
Some of the most common and most widely used features of such software include mechanisms for measuring and evaluating risk, enterprise-wide process and operations surveillance, company-specific stress testing to assess financial resilience, and others.
Most types of ERM software on the market today can also be customized according to the specific needs of the client company for more finely targeted risk management. When considering which digital ERM solutions might be a good fit for your business, it’s essential to look for the following criteria:
Top 5 Crucial Features
1. Easy to Use
Instead of keeping risk management internal to individual departments or business units, ERM is generally performed across an entire company, encompassing all its operations and processes.
Hence, before all else, an ideal ERM software needs to be simple and user-friendly, as it will be accessed and utilized by a large number of people across a variety of roles.
Mechanisms for data input must be easy to use to ensure that the company has a continuously updated, accurate bank of risk-related information at all times. The software should also enable smooth workflows across multiple users and devices, a condition most often made possible through cloud technology.
The more readily the entire organization can contribute to the development and implementation of its ERM strategies through the software, the more successful these strategies are likely to be as a whole.
Many companies today still perform their risk management processes across disparate web environments, data processing applications, and email clients.
This spread-out approach, however, can make coordination across the entire organization difficult and also put the company at risk for data breaches.
ERM software consolidates all of the company’s risk management data and activities within a single secure platform. Here, sensitive information is guaranteed to be well-protected and accessible only to company stakeholders.
3. Capable of Integrating with Other Organizational Systems
Because ERM is an enterprise-wide framework, good ERM software must likewise be able to integrate seamlessly into the enterprise’s existing systems.
Financial, human resources, and supply chain systems are just a few areas with which ERM must be intimately intertwined to ensure successful risk management for the company as a whole.
The goal of this integration is to foster a risk-aware and risk-responsive culture that enables all employees to make informed decisions and take decisive action whatever their role.
This more integrated, non-siloed approach has historically been shown to produce higher rates of success than solutions that make risk management processes the responsibility of isolated individuals or groups.
4. Involves All Stakeholders
It’s to a company’s immense benefit when the ERM solutions it employs can engage the vast majority, if not the entirety, of stakeholders within the organization.
The success of any ERM strategy, after all, rests on the active engagement and participation of everyone from the organization’s leadership to on-the-ground staff. Prioritizing intuitive solutions that people can easily learn to use logically means that more people are likely to use them on the regular.
Over time, using these solutions will in turn become more integrated into everyone’s regular routines and processes of decision-making.
5. Compliant with Global Standards and Best Practices
Any ERM solution a company chooses to use should naturally comply with globally acceptable standards and best practices set forth by the International Organization for Standardization (ISO).
At the base level, the software should offer users a standard set of analytics to start from and familiarize themselves with before they pursue more sophisticated and tailored ERM strategies.
Enterprise risk management is about more than just identifying potential problems the business might encounter; it’s more than just securing company assets.
At its best, ERM solutions should also create opportunities for the organization to achieve its objectives and improve its performance in multiple areas.
Well-integrated ERM software that is thoughtfully coordinated and aligned with a company’s needs and vision will always help enhance the productivity, efficiency, and longevity of the business as a whole.