With every passing day, businesses become more entwined in an ecosystem of partners, vendors, and suppliers in global markets. A local natural disaster, for example, can have far-reaching consequences throughout a global supply chain; so controlling, recognizing, and mitigating risks is critical to a company’s business continuity and financial stability.
A risk management process involves identifying, controlling, and assessing the harm that risks would have on a company if those risks come to pass. Examples of potential risks include data loss, cyber-attacks, cybersecurity breaches, system failures, and natural disasters.
Effective risk management means trying to control future outcomes as much as possible by acting early to reduce risk rather than reacting after a risk event. It also offers the possibility of reducing both the probability of a risk occurring and the risk’s potential impact.
A risk management plan helps a company to understand and control risks, so it can make better decisions and achieve business objectives. A company must identify potential threats and their effect on the business. Identifying vulnerabilities in advance makes it easier for the organization to prevent them from occurring.
A risk management plan begins with creating a stakeholder team to review top risks to the organization. This stakeholder team should include senior management, the compliance officer, and department managers.
Always consider emerging trends in your efforts to improve your risk management plan. Implement new initiatives as necessary as new risks develop — which, incidentally, underlines the importance of enterprise risk management (ERM) in your organization.
What Are the Current Risk Management Trends?
The complexity of today’s enterprises is driving increased risk exposure. New risks develop and current threats mutate, and businesses can struggle to keep up. Here are some current trends in emerging risk management that need to be on your radar.
Enterprise Risk Management Technologies
Over the years, technology (and the savvy use of it) has enabled new business models. Innovative technologies such as artificial intelligence continue to drive new business models. In the risk management arena, technology has two emerging considerations.
- It plays a crucial role in transforming companies so they can adopt more effective and efficient risk management practices that enhance performance, not just assure regulatory compliance.
- The landscape of rapidly evolving new technologies provides both significant benefits and risks to the organization’s existing business model and long-term survival.
A comprehensive governance, risk, and compliance (GRC) platform can integrate all types of risk management activities. These activities include managing policies, conducting risk assessments, understanding risk posture, identifying gaps in regulatory compliance, responding to incidents, and automating the internal audit process.
Operational Focus of Risks Teams
Simply relying on scheduled assessments leaves risk executives blind to the risks the organization is experiencing in real-time. If you focus on the theoretical risks, you miss the day-to-day threats that affect operations.
Getting down to the operational level includes conducting assessments with active lower-level employees performing daily operations. By increasing awareness of operational risks, you can undertake root cause analysis to discover where your risk management processes are weak. You do need infrastructure to collect feedback and implement controls to prevent repeat incidents, but the investment is worth the effort.
Another trend is risk data analytics: that is, advanced data mining and analysis techniques to achieve risk management objectives. Organizations are increasingly focusing on using data-driven approaches to unlock the maximum amount of information hidden in their data to discover and manage their risks.
The main advantage of risk analytics is that you can expand risk factors to include granular specifications that provide a more holistic and factual basis for risk management. You can also use it with predictive models to evaluate transactions to refine and improve early warning signals.
Managing Emerging Risks
A business can’t focus only on those risks whose likelihood and potential harm are already known. The business must also develop tools and techniques to identify newly emergent risks and then respond to those threats as well.
Chief risk officers emphasize risk velocity (the speed at which a risk can go from detection to actually happening) to aid ERM teams in managing and prioritizing risks. The focus of high-velocity emerging risks should be on the early detection of risk occurrences and developing effective reaction plans.
Key risk indicators (KRIs) can provide early warning of a probable risk occurrence. Reliable historical data will aid in identifying actual risks and preventing risk teams from focusing on phantom risks, which are hazards that are exaggerated due to bias, political motivation, or information withholding.
Increased Regulatory Compliance Requirements
Organizations around the world understand that regulatory compliance is critical. As regulations change, there is an increased focus on transparency and an increased risk of non-compliance. Compliance with HIPAA, FERPA, COPPA, GDPR, among others, influences organizations’ decision-making.
Compliance with new and changing regulations will continue to be a critical component driving risk oversight within an organization. Successful organizations see risk management as a strategic component of their value chain, providing long-term sustainable growth and innovation.
What Are the Challenges in Risk Management?
Risk assessments are often structured in such a way that company managers only capture the known risks. If you want to identify the “unknown unknowns,” consider calling on outside experts to contribute to or facilitate risk assessments. It also helps to include employees from various levels, functions, and skill sets to provide insights from their work experience.
Risk management silos occur when multiple corporate divisions each have their own procedures, spreadsheets, analyses, frameworks, and assumptions. These silos are significant roadblocks to a comprehensive enterprise risk management program.
Separate business areas focus on their view of risk rather than the big picture, unable to recognize substantial and avoidable losses. Such a segregated approach lacks context and information, making it nearly impossible to relate risk management and decision-making to corporate strategy, objectives, and performance.
Responsibility for risk is often distributed among different owners across the enterprise. Today it is critical that all these roles work with the same data and that this risk data is clean, reliable, and timely.
Include ZenGRC in Your Risk Management Plans
You can’t leave risk management to chance. Errors and omissions from manual processes and inexperienced hands can be costly and damaging to your company’s reputation.
Instead of using spreadsheets to manage your compliance requirements, adopt ZenGRC‘s compliance, risk management, and governance platform to streamline risk and audit management for all your compliance frameworks.
ZenGRC is a single source of truth that ensures your organization is always audit-ready. Policies and procedures are revision-controlled and easy to find in the document repository. Workflow management features offer easy tracking, automated reminders, and audit trails. Insightful reporting and dashboards give visibility to gaps and high-risk areas.
Worry-free risk management is the way forward! Contact us for a free demo of ZenGRC.