Every company needs to undertake a certain amount of planning if it wants to grow. This includes not only strategic planning to expand operations and increase profits; executives also need to plan for risks they might encounter so they can anticipate and avoid threats.
It makes sense, therefore, to integrate this planning throughout your organization so that no business function goes overlooked.
Risk management and budgeting may not strike you as related concepts — but they are. Integrating the two can be extremely beneficial for both endeavors. Each discipline can shed light on issues the other may not have perceived, and by working together, both risk management and finance can make your company safer and more profitable.
This cooperation will help streamline your budget preparation and help you give confidence to customers and stakeholders alike. Ultimately, your risk management team should be involved in your budget process.
Why Budgeting Should Be Part of Your Integrated Risk Management Plan
Integrating risk management into your budget-making process comes with a wealth of benefits. Looking at your company as a whole rather than as individual departments will help you see what you need to prioritize, and where your money should be allocated.
The risk-versus-opportunity conversations that are common in risk management are just as helpful for your budget too. Is there a possibility for growth in a certain area? If so, how much money should be directed there to achieve success? Is a department falling behind or holding back your company’s goals? If so, how can your budget be redesigned to help that department improve?
Moreover, tracking the results of your budget and its effects on your overall success can help you see where new risks may be emerging. If your costs are going up over time, that can mean that risks are developing in those areas that need to be curbed and mitigated. Budgeting and risk management can, and should, work in tandem to improve both departments’ chances for success.
How to Include Budgeting in Your Risk Management Plan
A key component of risk management is looking ahead to see what might happen in the future. A budget is similar: your financial team is looking ahead to see what areas of your company will need the most funding, and how that spending will affect your cash flow and overall profits.
An enterprise risk management (ERM) approach to budgeting should be a company-wide effort, not limited to your financial management team. Individual staff members or departments may inadvertently prioritize their own needs without considering the needs of other areas of the company. You’ll want to look at how the line items in your budget affect different departments to make sure that the allocation of funds will best benefit the company as a whole while remaining on budget.
You might want to think about applying the standard risk assessment steps to your budget planning process: identify any potential risks, assess their impact on your company as a whole, gather information, and then decide how best to mitigate these issues, either by reallocating funds or adjusting your budget overall. Financial reporting and ongoing monitoring are also critical, as you’ll want standardized metrics to factor into your decision-making when it comes time to create your next annual budget.
ZenGRC is Your One-Stop Risk Management Solution
If you’re ready to streamline your risk management strategy, ZenGRC can help.
It can be challenging to get a clear picture of what risks you’re facing while using outdated methods like spreadsheets and shared documents. To set your company on a path toward success, you’ll need to know exactly what your risks are, which staff members are monitoring them, and what internal controls and risk mitigation measures are in place.
ZenGRC is an innovative software platform that allows you this level of visibility and more. With automation and integration with a variety of third-party platforms, ZenGRC takes the guesswork out of the risk management process by providing you with a clear, concise view of your company’s entire risk landscape. Schedule a demo today to learn how ZenGRC can provide a tailored risk management solution for your company.
