In today’s world, it’s impossible to run or grow a business without taking on risks. That doesn’t mean you can’t arm yourself against them.

Implementing an enterprise risk management program helps enhance your business’s resilience. There’s just one major problem, though: Doing so efficiently isn’t always easy.

Read on as we share some of the common enterprise risk management challenges businesses face and how you can overcome them.

Understanding Enterprise Risk Management

An enterprise risk management program is all about being proactive in identifying and taking a structured approach to mitigating risks. Yes, the program won’t eliminate risk entirely, but it will play a significant role in helping your business remain stable in the face of potential disruptions.

The Risk Management Process

The risks each company faces will be unique to it, and so will its enterprise risk management program. That said, there are a few general steps that every ERM program should follow to stay on track:

• Risk identification: The risk identification process involves collaborating with department heads to uncover any potential risks that could get in the way of your business achieving its goals.
• Risk assessment: After identifying the potential risks, the next step is to assess their likelihood and impact.
• Risk responses: You’ll then have to decide how to respond to the risks you’ve uncovered, choosing between avoiding, mitigating, transferring, or accepting them.
• Risk integration: This entails building an organizational risk culture, ensuring everyone is aware of the company’s key risk management strategies.
• Risk monitoring: Consistently track risks to determine whether your management strategy is working as intended or if any adjustments are needed.

The Common Challenges of Implementing an Enterprise Risk Management Program

Implementing an enterprise risk management program might seem simple and intuitive. Unfortunately, this is far from the case.

Regardless of your business’s size, you will face certain enterprise risk management challenges that could easily make your work much harder than it should be. Here are some of the common challenges most organizations face.

Lack of Executive Support

The executive leadership must buy into the enterprise risk management program. After all, they are the ones in charge of deciding where and how to dedicate the company’s resources.

Executive support also plays a critical role in optics. Ideally, you want everyone in the company to take the program seriously. If, however, the leadership team is seen as not fully supporting it, others within the organization won’t be as vigilant.

Inadequate Time and Resources

Think about how much time, resources, and collaboration an effective enterprise risk management program needs. If you don’t dedicate enough time and resources toward brainstorming, assessing, and solving potential risks, the program will not work. This leaves your business’s operations, finances, reputation, and success extremely vulnerable.

An Inconsistent Process

Every step of your enterprise risk management program has to be consistent. This should include everything, from how the company defines risk to how each department assesses and manages it. Consistency helps to simplify and streamline the workflow, which goes a long way in making it successful.

Risk Reporting

It’s hard to manage risks that only a few people know exist. This is why reporting is crucial. Unfortunately, when it’s time to report the risks you’ve identified, you’ll have two issues to navigate.

The first is deciding how much information you should share with the different departments. The second is figuring out the most effective way to communicate the risks involved.

How To Navigate These Challenges

It’s not enough to simply identify the common enterprise risk management challenges. You have to go a step further and come up with ways of navigating them, ensuring nothing gets in the way of your organization’s ability to mitigate risks, the organization itself not least of all.

For instance, when reporting risks, it often helps to split the reports by your intended audience. In such a case, you could have both board and line reports.

The board reports would only present risks whose potential impact exceeds a clearly defined threshold. Alternatively, the line reports would only detail mid-level and tactical risks. Doing so will go a long way in helping you avoid superfluous information.

Here are some of the steps you can take to solve some of the major challenges you’ll face when implementing an enterprise risk management program.

Have Clearly Set Goals

How can you streamline your company’s risk identification and assessment process if you don’t clearly define the goals that potential risks could hinder? As such, the best place to start is by setting your business’s short and long-term goals and ensuring organizational alignment throughout.

Create a Risk Appetite Framework

This is a structured governance system that defines how much risk your company can accept, both functionally and financially, to achieve the specific goals you have set for it.

The framework should include a few key components, such as risk tolerance and limits. It should also include details on your regulatory compliance management, clearly outlining who is responsible for monitoring risks and what to do if the company breaches risk limits.

Build an Enterprise Risk Management Business Case

If your biggest obstacle is getting the senior management to buy into dedicating resources toward creating an enterprise risk management program, building a business case can help. The business case allows you to demonstrate the value of having an effective enterprise risk management program and why it should be an integral part of the company’s overall strategy.

Safeguard Your Business’s Success With Enterprise Risk Management

Think of an enterprise risk management program as your company’s very own insurance, providing your business with greater security. Unfortunately, there are many challenges to overcome. The good news is that there’s an effective way to do just that.

Turn to Union Risk Services today and let our team of dedicated professionals enhance your company’s process of risk management. With our help, you’ll have a better chance of building the long-term stability your business needs.

Talk to us today at 718-370-3131 to schedule a consultation.