The modern business environment is constantly subject to change, and risk leaders need to bet on the inevitability of the unknown.
Situational awareness and anticipation can mean the difference between risk being a tool or a nightmare. In the words of Theodore Roosevelt, “Risk is like fire: If controlled it will help you; if uncontrolled it will rise up and destroy you.”
Risk is more than just internal controls over financial reporting. In an integrated risk environment, many operational risks can have an impact on financial and revenue risks. Risk is interconnected, and CROs and CFOs need provision for the unknown both internally and externally. Organizations and their stakeholders need to chart a path for active enterprise risk management that first begins with meeting objectives and performance goals at the entity, division, department, process, project, and asset levels.
Risks must then be identified and assessed with determined impact tolerances, with operational contingents in place for operational resilience. While some organizations have strong compliance practices, they are failing to proactively measure case-specific vulnerability across the organization.
Active enterprise risk management needs a loop of open communication and documentation for all relevant stakeholders to maximize the organization’s ability to see and respond adequately to risk and change.
The challenge that many organizations face is that a proper enterprise risk management program involves a coordinated effort across departments and functions. The cost and impact of an emerging risk can be severe, and organizations must conduct due diligence on their risk management program’s performance and its effect on meeting objectives. Continuous risk monitoring helps your institution improve its ability to identify and manage risk and stay aligned to overall business strategy.