What Is Enterprise Risk Management?

Wondering ‘what is enterprise risk management?’

If you want a tool to help you deal with failed business ventures or emergencies, use enterprise risk management (ERM). It’s a great way to prepare for these situations.

About 20% of businesses fail within their first two years of opening. One reason behind a short-lived project is the lack of an enterprise risk management tool.

Read on for a quick guide on ERM, how it works, and more.

What Is Enterprise Risk Management?

Risk management is the practice or system used to prepare your business for failure, threats, and other types of risk. Typical risk types include:

• Strategic risks
• Compliance risks
• Financial risks
• Operational risks

As your company grows, so do the risks and threats you face. Enterprise risk management can deal with them and their results. When planned well, this tool can even turn drawbacks into advantages.

What Is a Risk Manager?

You’ll need a risk manager when implementing an ERM. They’re responsible for identifying, measuring, and reducing business risks. As risk specialists, they will develop and communicate your organization’s risk policies.

Enterprise Risk Management Process

Next, let’s talk about how ERM helps your business recover. It consists of a variety of processes. The standard steps or processes in ERM include:

• Setting of objectives
• Identifying the risks
• Analyzing the risks
• Risk response and management
• Communication and observation

It’s the most common and practical system used in risk management. You can also add extra steps when the need arises for your company.

For example, your risk manager may include a risk ranking system. It allows you to know the threats to focus on. High-level risks go straight to upper management for immediate resolution.

A cyberattack risk is different from an operational risk. If you’re used to dealing with traditional issues, you’ll be more comfortable with the latter. However, remember that 43% of small businesses suffer from cyberattacks.

Plan and follow the five-step approach well and you won’t have anything to worry about.

Advantages of Using Enterprise Risk Management

One reason to use an ERM is they’re easy to understand. You don’t need to spend too much time or funds training your teams to learn. ERM systems are also scalable, meaning they suit small, medium, and even large enterprises.

It also simplifies, updates, and streamlines necessary information. It ensures all the UCC filing, legal issues, or financial disputes will reach the proper departments. If you need help with UCC filing, you can learn more here.

Investing in an ERM can also reduce operational costs thanks to the system’s efficiency. Improved business flow and productivity will affect your business resilience. It also promotes improved customer relationship management.

Keep Your Business Risk-Ready Today!

We hope you enjoyed learning what is enterprise risk management. Use the information above to determine whether it’s the best fit for your business.

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