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Adam Collyer CPA Smart Enterprise Resource Solutions Talk to an advisor: (816) 743-7700

ERM: An Easy Way to Get Risk Under Control

October 30, 2018

You’ll never be able to prevent every risk from becoming reality, but you can — and should — take steps to manage potential perils. Among the most popular approaches is enterprise risk management (ERM).

How It’s Different

Unlike traditional risk management techniques, which often are informal and “siloed” (meaning that each department focuses on minimizing its own risks), ERM is an integrated, company-wide process. ERM assumes that all risks are related — that, for example, lax controls in your accounting department may enable fraud and, in turn, raise your business’s overall expenses.

ERM isn’t about eliminating every risk. It helps you clarify your company’s appetite and capacity for specific risks so you can develop a cohesive philosophy and plan for how they should be handled. In other words, ERM enables you to find an acceptable level of risk that allows you to promote your company’s strategic objectives.

Making Your List

ERM implementation starts at the top of your organization. Owners and executives must understand the need for ERM so they can sell it to the rest of the team members.

Once you have buy-in, assemble a list with input from every division and department. Start with risks that endanger companies of all sizes and sectors, such as those involving finance, IT, regulatory compliance, and distribution. Then move on to company- or sector-specific risks.

Once your risk list is robust, rank items based on likelihood and impact. Then analyze worst-case scenarios for each one. If the list seems overwhelming, assign each risk to an “owner” who will be responsible for analyzing and monitoring it.

Enterprise-wide View

Ultimately, you must come up with ways to manage your biggest threats. Do this by building on current risk management practices, such as audits, insurance coverage and internal controls. You can gradually incorporate an enterprise-wide view of risk to make these activities into a true ERM process.

ERM software can help. If employees understand the software application and use it regularly, ERM will become part of their jobs. For you, frequent monitoring of important metrics is an integral part of keeping up with ERM. Many software packages come with “digital dashboards” that keep critical risk-related information instantly accessible on your computer’s desktop.

Incremental approach

You don’t have to implement every component of an ERM program at once. An incremental approach that begins with relatively simple processes and builds the program over time is easy to adopt and can be very effective.

Ready to make the smart move forward? Contact your MarksNelson professional at 816-743-7700. 

About THE AUTHOR
Adam Collyer specializes working with clients in the insurance industry. In this role, Adam provides attestation services to both life and health and P&C insurance companies. Additionally, Adam leads the firm’s Enterprise Resource Solutions group which provides consulting services in the areas of ... >>> READ MORE
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