What is Enterprise Risk Management (ERM)?
What Is Risk Management?
Risk management is concerned with detecting potential problems, determining which risks should be addressed, and putting measures in place to address those risks.
Businesses that have identified the risks will be better prepared to deal with them more cost-effectively as well. Because of its emphasis on anticipating and understanding risk across an organisation, this holistic approach to risk management is sometimes referred to as enterprise risk management.
Types of Risks:
These categories are not set in stone, and some aspects of your business may fall into more than one. The risks associated with data protection, for example, could be considered when reviewing your operations or the compliance of your business.
Why is Risk Management vital for your business?
It can help your business by-
Improving decision making, planning, and prioritisation,
Helping you allocate your capital and resources more effectively,
Anticipating future vulnerabilities,
Formulating an action plan in advance that results in an effective business proposal.
Risk management becomes even more critical as it can provide you with a competitive edge when your company decides to try something new, such as launching a new product or entering new markets or technological breakthroughs.
How To Manage Risk?
International Organization for Standardization (ISO) has provided a five-step risk management process that can be used by any organisation: 1.Identify the type of risks. 2.Analyse the likelihood and impact of each one. 3.Prioritize risks based on business objectives. 4.Treat (or respond to) the risk conditions using below strategies. 5.Monitor results and adjust as necessary. By analysing the risk using the above process, the below strategies could be implemented accordingly.
Risk Management Strategies:
There are four ways of dealing with, or managing, each identified risk.
Conclusion
Businesses face numerous risks that threaten their survival and growth which makes understanding of the fundamental principles critical for long term sustainability of business.
Nexia Singapore PAC professionals have a thorough understanding of the various threats that your company may face.
We specialise in assisting you in identifying threats and managing risk so that when risk becomes a reality, you are prepared to deal with the consequences and bounce back to protect your business and its success.
Let’s develop risk assurance services to meet your needs
Frequently Asked Questions
The best strategy is to prioritise risk control and reduce those that can have a significant impact on an organisation. Risk reduction entails anticipating disasters and devising ways to mitigate their consequences. Furthermore, risk mitigation entails identifying potential business risks, analysing the impact of each risk, and ranking risks based on their impact on the business.
Internal control ensures that the company’s operations are efficient, that financial and other information is reliable, and that the company complies with applicable regulations and operating principles which significantly leads to risk reduction.
Risk assurance audit helps the management in monitoring and assessing the effectiveness of the company’s internal control and risk management systems and ensuring that the control measures have been properly planned and implemented.
There are majorly five crucial components that must be considered when creating a risk management framework. They are listed as follows:
Risk identification;
Risk measurement and assessment;
Risk mitigation;
Risk reporting and monitoring; and
Risk governance.
