The Journal of Risk and Insurance has revealed that businesses with established Enterprise risk management procedures have a 25% chance of increasing their business value. In addition, Dr. Ronan Gallagher and Mark Farrell of the University of Edinburgh confirmed this by stating that companies with mature Enterprise Risk Management traits have greater firm values.
Some of the advantages of implementing an ERM include:
· Expansion in the opportunities that are accessible to your company – By being risk aware, companies may identify areas of improvement. This is because when evaluating its enterprise’s risk, a company is able to assess its risk culture and determine your risk appetite.
· Decreases the organization’s exposure to surprises – An organization that has put in place an ERM will be ready to tackle the adversity that stands in the face of its business’ success. By integrating strategic planning, the organization is able to maneuver alternative scenarios.
· Improves the likelihood that the organization will achieve its goals and objectives and improve its overall performance – The business is able to find workarounds and avoid common pitfalls. This coupled with risk reporting will definitely increase the likelihood of success.
· Better allocation of resources and capital – By having a formal statement of risk appetite to help decision making and integration of the ERM process with strategic planning, the organization will function optimally.
· Improved organizational resilience and agility through risk awareness – By viewing ERM as an evolutionary process whereby the organization continually refreshes its existing risk inventory and revisits its assessments of probabilities and impacts to potentially catastrophic risks, the business remains resilient and agile.
But, in order to provide value, an ERM program must be effective. Knowing the responses to the following two questions is crucial.
• What are the qualities or aspects of a successful ERM program?
• How can I tell whether an ERM program is working?
At CFOD Hub, we will help you answer the above questions and equip you with the necessary training and advisory that will ensure you reap all the benefits of ERM.
Reach out to us for quality advise at an affordable rate.