how to implement enterprise risk management practices
erm practices will vary based on a company s size risk preferences and business objectives below are best practices that most companies can use to implement erm strategies as a company implements erm practices it is widely advised to continually gather feedback from all employees everyone will have a different perspective of what might not be working or what could be done better advantages and disadvantages of enterprise risk managementerm sets the organization wide expectations around a company s culture this includes communicating more openly about the risks a company faces and how to mitigate them this leads to less unexpected risks and more guided direction on how to respond to certain events in addition this may lead to greater employee satisfaction knowing plans are in place to protect company resources as well as greater customer service knowing how to respond to customers should certain risks actually occur erm practices are often synthesized by a standardized risk report delivered to upper management this report succinctly summarizes the risks a company faces the actions being taken and the information needed for decision making as a result a company may be more efficient with its time especially considering what is delivered to upper management erm may also have a company wide positive impact on the resourcefulness of the business erm may eliminate redundant processes ensure efficient use of staff reduce theft or increase profitability by better understanding what markets to enter into as a company builds out its erm practices it will likely consider familiar risks it has been exposed to in the past therefore erm is limited in identifying future risks that the organization is unaware of that may have more detrimental impacts in this manner some may consider erm as reactive as companies can only forecast risk based on what they have prior experience with erm also relies very heavily on management estimates and inputs this may be nearly impossible to accurately predict for example in the very low chance that a company forecasts the occurrence of the covid 19 pandemic would a company be able to accurately calculate the fiscal impact of business closures or changes in consumer spending erm mitigation costs may also be difficult to assess erm practices are time intensive and therefore require the resources of the company to be successful though the company will benefit from protecting its assets a company must detract time of its staff and may make capital investments to implement erm strategies in addition a company may find it difficult to quantify the success of erm as financial risks that do not occur must simply be projected may make a company more prepared for risks and uncertaintiesmay leave employees more satisfied with the future state of the companymay result in greater customer service as companies are prepared for certain situationsmay result in efficient reporting to upper management that enhances decision makingmay lead to more efficient company wide operationsmay not accurately identify the risks a company is likely to experiencemay not accurately assess the financial impact or likelihood of an outcomeoften requires time investment from a company to be successfuloften requires capital investment from a company to be successful