Aligning Risk
with ERM
The complexity of Enterprise Risk Management (ERM) is
a growing challenge and an equally lucrative opportunity for organizations.
We're seeing this trend due to rapid changes the ecosystem of businesses and
their ability to manage wealth/funds. ICICI Lombard recently published its
research "Readiness of India Inc.". It throws up immersive insights
for companies to reflect and change the way they look at risk, return and
wealth management. An online research by interviewing 130 C-Suite risk officers
and identified the way Indian organizations deal with organizational wealth,
risks and investor interests associated with it.
Some of the
key highlights of the report:
●
81% have appointed board level
subcommittee for risk management
●
3 out of 4 organizations have risk
governance mechanism in place for more than three years
●
29% deploy advanced analytical tools
for impact assessment
●
36% do not perform risk culture
diagnostics
●
35% continue to use spreadsheets for
risk management
●
11% do not use technological
platforms for risk management
●
81% believe that ERM helps protect
corporate reputation
Wealth management is more about engaging with wealth
in meaningful ways to realize its true value/return. The research material
explains how ERM as a mechanism can combine culture, practices and capabilities
with strategy and execution to manage risks and create more value out of it.
The typical risk areas would include regulatory compliance (53%), operational concerns,
geopolitical uncertainty. I also believe that uncertain
economic growth also brings with it increased risks. Interestingly, 23% of the
respondents saw information insecurity as a key risk along with technological
disruption. It's important to note here that the responses are reflective of
direct risk exposures that their respective companies are exposed to. ERM
implementation would bring in more accurate results as it considers the implementation
of company practices, strategy and cultural aspects to reflect real terms and
numbers. Hence, business decisions would also become key drivers of ERM
implementation. The research report did reflect this fact as applicable with
88% of organizations.
ERM creates a supportive fabric not just for organizations but also for
investors. 76% of the respondents to the research survey expressed that ERM
framework helps boost investor confidence. I think organizations looking
forward to ERM implementation would require maturity at multiple levels to
devise an accurate and responsive ERM strategy. Combining critical yet
influential factors of organizational functioning and performance can bring to
the fore the keys to an efficient ERM plan. For e.g merging control and
compliance with strategic business decisions. The survey brings to light the lack of
risk compliance governance (RCG) within Indian companies. 73% of organizations are equipped with RCG for
more than 3 years while only 7% of organizations introduced it in last year. I
believe we need to see more of this and at an accelerated pace.
the survey, it was revealed that most organizations
(98%) adopted designed and documented structure for risk governance. This would
include appointing board-level sub committees, redoing their risk analysis
strategies and imbibing a renewed/updated approach to risk management in times
when disruptions are increasingly becoming common across industries due to
Artificial Intelligence (AI), Augmented Reality Biometrics (AR),
Internet-of-Things and Predictive Analysis.
To come up with an effective ERM plan, the organizations
need to assess the amount and type of risks the organizations are willing to
take in line with their strategic decisions. Well defined KRI's or Key Risk
Indicators was seen among 72% of organizations according to the survey and 41%
of respondents claim to have them perfectly integrated, linked and prioritized.
Hence, risk as a factor is an integral ingredient that should be aligned
mindfully with the ERM framework.
1 comments:
Hats off to your presence of mind. I really enjoyed reading your blog. I really appreciate your information which you shared with us.
safety course in chennai
EmoticonEmoticon