With enterprise risk management (ERM), business decisions are approached with regards to the risk they oppose. Opportunities are rated against their most likely outcome, and threats are mitigated based on their potential impact. ERM strategies can be applied to critical parts of your operations, or to the company as a whole.
There are several lists available online that comment on best practices when implementing enterprise risk management methodologies. Most of them only apply if your company already utilizes a risk management process. However, even without this process in place, there are still some tips that can help your business make better decisions. Check them out below.
- Align the end date of contracts, such as insurance policies and rental agreements, with dates regulatory changes are expected. Also, keep in mind the terms for which company objectives are valid. If any contract extends beyond those moments, it will take away your agility to change plans in the midterm.
- Determine your risk appetite. At a neutral moment, consider how much impact a risk may put on your organization in a certain period of time. Consider to only get insurance for events with an impact and occurrence above this threshold level.
- Be aware that people are more viable for opportunities than threats. It sounds more appealing to invest with a 10% chance of making $10,000, than spending the same amount to prevent a risk with an equal 10% chance of losing $20,000 or more.
- Get the right software. The more you know, the better your decisions will be.
- Categorize any identified risk into Low/High occurrence and Low/High impact. Don’t worry about events that have a low occurrence and low impact. Any healthy company should be able to cover those easily. Try to lower the frequency for high occurrence/low impact events as these sum up quickly. Get proper insurance for risks with high impact and low frequency. Any risk with high occurrence and high impact is an immediate threat to your organization. Make effort to reduce the frequency and look for alternative solutions to lower the potential impact.
- Your insurance agent is a subject matter expert. Talk to him/her on how to mitigate risk and ask for lessons learned from other similar organizations.
- Having access to historical data in a well-organized software system is an enormous plus! It helps you to understand frequency of occurrence and identify which preventative actions prove to be working best.
- Safety meetings help manage risk. Be sure to hold meetings with employees to go over safety measures such as job safety analysis and standard operating procedures.
Risk management should not be something you or one department in your company should do. It is a joint effort across all levels and disciplines. Getting everyone on the same page will not only improve your risk ratings, but also improves the health and safety of your employees.