July 14, 2011 – Companies with processes and tools enabling visibility into risk and actionable recourse will be the successful businesses, according to new research analysis from Aberdeen.
Aberdeen identified useful strategies along with top pressures for enterprise risk management. Several catalysts create demand for ERM effectiveness, like protecting the brand, dealing with market instability and addressing compliance mandates. Corporate risk management includes handling elements that could impact finance, operations, reputation and other areas.
"While many drivers of ERM exist, they require an organizational structure that supports such programs,” says William Jan, senior analyst, financial management and GRC at Aberdeen, and author of the report.
The culture determines the success of the program’s enterprise-wide support. Aberdeen finds that senior managers at successful organizations are actively involved as champions of risk management (35 percent more likely than all other organizations). A senior manager can determine risk preference overall and create incentives to induce employees to abide, according to Aberdeen.
Aberdeen research has shown that top performing companies are more likely to have adopted cross-functional collaboration and even more likely to have established roles and responsibilities within departments to execute risk initiatives, compared to lower performing counterparts.
The report’s analysis indicates that technology can facilitate ERM processes by automation of risk identification, monitoring and reporting, but having the right information delivered to the right person at the right time is crucial. Additionally, without staff accountability and a risk aware culture, companies won’t gain benefits of ERM, despite technologies or processes in place.
“If risk domain expertise is a capability that an organization is lacking, the company can accelerate its ERM efforts by considering the outsourcing option,” Jan suggests. “In the absence of risk experts and processes, top-performing companies are 2.9 times as likely as their competitors to outsource selected expertise and systems, whether it is application development, training or creation of a risk-based accountability structure, to increase the efficiencies of their enterprise risk management capability, while counteracting cost increases.”
The report, “Managing Enterprise Risks,” is available free from Aberdeen for a limited time.
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