Identify potential risks and uncertainties

Risk identification is the initial cognition of any type of risk — workplace incidents, expiring licenses, natural disasters and cyber threats like malware or behavioral anomalies in third-party vendors. The system flags any potential issue that can disrupt your day-to-day activities.

With a reliable risk management strategy, you can not only anticipate potential threats but also build your company’s resilience and set up business continuity plans in case the unexpected occurs.

Assess the likelihood and impact of risks

This involves careful analysis and examination of flagged threats to understand their impact and potential fallout. You can administer any corrective action only after thoroughly evaluating all recorded risks.

Risk management software helps automate data collection, analysis and calculations. It lets you present visualizations through interactive dashboards and reports. With scenario modeling, you can assess potential outcomes. The platform offers various features that aid in evaluating the likelihood and impact of risks, such as:

• Probability assessment analyzes data to estimate risk likelihood.
• Impact assessment evaluates environmental, social and economic consequences.
• Risk scoring assigns scores to quantify risks.
• Risk prioritization ranks risks based on scores for resource allocation.

Enhance resource allocation

Analyzing the severity of the threat and assigning risk scores based on the potential impact on your objectives makes it easy for your risk management team to decide which threats to prioritize first. This is a crucial step, especially for mid to large-sized organizations that deal with multiple threats daily.

Develop risk mitigation strategies

After prioritizing risks, it’s important to determine the appropriate response for each risk. You can develop robust risk mitigation strategies essential for minimizing the impact of risks and navigating challenges.

Risk remediation helps develop controls and strategies to neutralize malignant agents. Under the IRM (integrated risk management) software framework, it includes setting up automated workflows to deal with commonly occurring threats, updating database signatures and creating new products to handle evolving threats. Following a standardized process makes it all the more easier to identify, quarantine and mitigate risks.

Continuously monitor risks

The risks threatening your organization don’t take a day off — they are continuously evolving and getting more complex. That’s why modern risk management is a continuous process that doesn’t end with mitigation.

You have to continuously benchmark the effectiveness of your controls and see how they hold up against new and emerging threats. Once they start failing, it is up to your risk management team to modify them and create new controls.

Meet regulatory and compliance requirements

Effective risk management helps businesses ensure compliance, avoid penalties and protect their reputation by fulfilling regulatory requirements. You can identify and assess regulatory risks, stay updated with changing compliance requirements, and automate risk monitoring and reporting.

When it comes to enterprise risk management, several frameworks act as a repository of critical risk management strategies and principles. They are a standardized reference point for risk management departments, business owners and upper management to identify, understand and remedy risk.

Depending on the industry and the organization, particular frameworks are crucial to defining, assessing and monitoring controls. We’ve highlighted some of them as they may apply to you:

COSO ERM Integrated Framework

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) created this framework in 2017 to respond to the growing need for an updated framework for risk management in business.

The American Accounting Association, the American Institute of Certified Public Accountants, the Financial Executives International, the Institute of Management Accountants and The Institute of Internal Auditors have funded this initiative from the private sector. The Sarbanes-Oxley Act (SOX) is a part of the framework.

ISO 31000 ERM Framework

It’s a comprehensive risk management framework from the International Organization for Standardization (ISO). It covers everything from risk identification and assessment to acceptance and mitigation.

It’s relevant for businesses of all sizes, irrespective of sector or industry and a valuable resource for organizations looking to design and implement their own risk management program.

COBIT ERM Framework

The Information Systems Audit and Control Association (ISACA) created the COBIT ERM framework in 2019, primarily for risk management and governance in the IT industry.

This flexible framework applies to large organizations and also accommodates small to medium-sized businesses. It provides a dynamic and comprehensive model to outpace traditionally siloed approaches to risk management.

NIST ERM Framework

The National Institute of Standards and Technology (NIST) created this globally recognized framework on behalf of the U.S. Department of Commerce. It helps design and implement cybersecurity programs.

It’s also highly recommended if you are part of an organization that conducts business with a government agency.

RIMS Risk Maturity Model ERM Framework

The Risk Maturity Model (RMM) was designed by the Risk Management Society (RIMS), a non-profit agency. It contains seven ERM attributes, multiple readiness indicators and competency drivers to benchmark your risk management process against industry peers, make necessary adjustments and build resilience against risks.

Concepts

Every organization has a nuanced risk response strategy in tune with its financial and strategic objectives. However, if we were to deconstruct these programs, we would develop a few broad risk management concepts that define how organizations deal with risk in general.

Risk Avoidance

Risk avoidance means minimizing the organization’s risk exposure. If any activity or venture involves a nominal amount of risk, you avoid it like the plague. It requires rigorous training, policies and regulations in place.

Risk Reduction

This response attempts to minimize potential losses caused by the risk instead of avoiding it altogether. It requires a significantly deeper understanding of what kind of risks you’re facing and what steps you should take to offset them. For example, financial diversification in an investment portfolio is an excellent risk-reduction strategy.

Risk Sharing

Risk sharing involves multiple parties willing to share losses in exchange for a larger share of the pot. The more parties you have in a risk-sharing agreement, the easier it is to absorb any risk. You can see an example of this strategy in home, auto and health insurance where everyone buying into the same plan is in a risk-sharing agreement.

Risk Transfer

This risk management technique transfers the risk from an individual to a third party. When you buy any insurance, you transfer risk from yourself to a third-party entity.

Risk Acceptance

Risk acceptance is where you carefully consider and assess a threat and decide its impact is not significant enough to warrant corrective action. In other words, you insure yourself against risk incidents.

Best Practices

Despite our best efforts, risk will always be a part of our lives — so we buy insurance, wear seatbelts and get endpoint security. That’s why risk awareness is one of the best defenses against both internal and external threats. Adopting these best practices into your organization’s framework can pay generous dividends in the long run.

Don’t Get Complacent

Implementing a risk management framework and setting up relevant controls is only half the job. Once you have a program in place, you must continuously monitor individual units’ effectiveness to ensure it’s in good shape. If you get complacent and allow your controls to fail, it could have catastrophic consequences.

Prepare Clear Policies and Procedures

Having clear and transparent documentation of policies and processes can go a long way in standardizing the concerted effort in favor of risk management.

With guidelines on how your company approaches risk and how to respond to risk incidents, you can establish a point of reference for all existing and future employees. The same goes for any business continuity plans you’ve put in order — you must document everything.

Establish a Culture of Risk Awareness

Every organization has its unique risk culture, and it’s imperative to have an open line of communication about the company’s values, attitudes and responses to risk. Transparency and communication are vital to nurturing a culture of risk awareness among the team.

Keep Everyone in the Loop

This is one of the most essential practices in risk management — keeping all relevant stakeholders in the loop. Starting from the initial identification of a potential threat, update every individual related to a particular risk.

Risk management in business is like a team sport, and it’s much easier to fight risks as a team than as an individual. So make sure your managers, risk owners, shareholders and upper management are aware and trust them to carry out their responsibilities while you do your bit.

FAQs

How do risk management programs work?

Risk management solutions help identify, assess and mitigate risks that can impact your operations. The first step is identifying risks by conducting risk assessments, analyzing historical data, engaging stakeholders and utilizing industry best practices.

The next step is to evaluate the potential impact of each risk. By assigning risk scores based on severity and probability, you can prioritize them and determine which ones require immediate attention.

The final step involves developing and implementing risk mitigation strategies such as using control measures, establishing contingency plans and transferring risks through insurance.

How do I know I’m ready for a risk management system?

If you find that your organization has experienced significant risks or incidents in the past, it may be a sign that you need a risk management system. It can help you adhere to regulations and avoid penalties or reputational damage. You must assess your risk profile, industry requirements and budget to determine the type of solution you need.

Also, consider your organization’s willingness to invest time and resources, commitment, dedicated effort, and support from leadership and stakeholders. It involves:

• Conducting risk assessments
• Developing policies and procedures
• Training employees
• Integrating risk management practices

How do I select a risk management system?

We understand that the process of selecting a risk management system can be complex and time-consuming. This is why our analysts have developed an intuitive requirements interface to help you find the risk management vendor that perfectly aligns with your business needs.

Our free requirements template and comparison report allow you to input your unique criteria and preferences to narrow down the list of potential vendors and find the ideal fit.

If you need assistance in choosing the right software for your needs, we are here to help! Get in touch with our team for personalized recommendations by sending a message to [email protected] or calling us 855-850-3850.