If culture cannot come to Risk Management, then Risk Management must come to rescue corporate culture. Part II of III
It is highly recommendable that all organisations focus on developing a robust corporate culture platform to create and promote shared values, increased profits and good governance. To support the articles focus on Risks, management has to recognise the link and references to strategic risk management (SRM) and enterprise risks (ERM). We suggest a disruption journey by combining ERM disciplines to SRM processes to identifying and address those risks that threaten growth.
Gone are the days of traditional risk assessments, risk maps, and risk rankings based on subjective risk criteria. Instead, start the development of a dynamic and ambitious risk strategy by identifying the particular Governance, Risk and Compliance (GRC) components. If an ERM program focuses on SRM, the response is usually on the top risks that are vital to the execution of the corporate strategy;
- Focus on value creation rather than value protection
- Identify the functions that can act as a 'disruption force' and act as a catalyst
- Identify the specific risk assumptions that are in turmoil and are vital to the risk strategy.
In this article, we focus primarily on Risk Management related to strategic risk management (SRM) and enterprise risk management (ERM). (See the previous article on Compliance to follow the GRC path; http://www.copenhagencompliance.com/news/issueXXVII/corporate-culture-Part-I-of-III.php)
That which has brought you so far so well...
Management that solely focuses on traditional ERM practices, which assess risks based on the likelihood and impact when they will occur, requires management to measure the impact of each incident. What is going to happen in the future because unless the corporate culture changes radically, history will often repeat itself?
Traditional risk management programs are often introspective without the ability or insight to support strategic risks. The link between SRM and ERM optimises the risk-management process to provide intelligence to capture new trends and perform scenario planning.
A structured link to identifying the root causes of past mistakes to SRM and ERM may provide solutions and the identification of a new set of strategic and enterprise risks. SRM can then help organisations to look ahead and identify potential risks and threats, which arise from new business conditions and radically transform the performance of the enterprise.
Building the Strategic Risk Metier
One of the advantages of creating a robust corporate culture is that such advancement can govern, measure and include important issues such as brand reputation, competition and innovation.
In order to build an SRM and ERM platform, management must ensure that competencies to address strategic risks effectively are available. Management can then consider an annual workshop to develop an SRM/ERM framework based on the following principles:
- Consider painting a risk scenario that identifies and combines ERM to SRM.
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- Identify the GRC components that challenge the current business doctrine.
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- Develop a risk-sensing mechanism to identify existing and potential threats and opportunities.
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- Align the above with corporate strategy and scenario planning exercise.
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- Document the necessary risks to assess, manage, control, test and monitor the risks.
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- Develop a framework to balance the risk culture, to integrate, embed and automate the strategic risks to enterprise risks.
This approach is recommended because traditional ERM-based methods tend to dwell on the most known and obvious risks that are linked to operation risks rather than to business strategy risks. The method to link ERM to SRM identifies how to seize specific business opportunities that can lead to greater profits, competitive advantage and improve corporate culture.
For more to create a platform for corporate culture and workshop details see: http://www.copenhagencompliance.com/Responsible-Ethics-&-Integrity-Brochure.pdf
