Creating an environment where a risk culture thrives
Since the release of our Essential ERM solution, we’ve had the opportunity to speak with many smart risk and finance professionals. This post is the first of many to come. As we go, we’ll share with you some of the best observations we’ve heard from experts in the practice. We hope these can help you make better sense of risk management within your organization, and more importantly, boost your business outcomes!
The first and most common thing we hear is that Enterprise Risk Management (ERM) means very different things to different people. For many, it is an outgrowth of compliance. For others, it is an extension of the executive planning process, identifying opportunities and threats that affect business outcomes. Still others view it through the lens of oversight and reporting. But across the board, there is a lot of interest in the importance of fostering risk management practices through an underlying “risk culture”.
Culture is an intangible, and risk is complicated and challenging. But, a great deal of it boils down to the behaviours of individuals in a specific group or setting and much value can be found by zeroing in on two dimensions:
1) More powerful communication of risk insights
2) Better alignment of enterprise risks to incentives.
COMMUNICATION: Not every employee has the same insight into the operational, market, financial or reputation aspects of risks. Not everyone is in the same position to offset the downside of risk or exploit the opportunities inherent in uncertainty. Question: Are your risk specialists sharing their insights with the doers in your company and vice versa?
INCENTIVES: Similarly, not everyone feels the impact of risk equally and not everyone is affected by uncertainty the same way. Question: In terms of “skin in the game”, do the people in your organization who are best positioned to mitigate and manage risk early and effectively have the authority to do it? Do the incentives make them likely to act decisively or effectively?
These are ideas we discuss often. If they are interesting to you, please don’t hesitate to reach out – we’d love to talk.
Also, please feel free to share your thoughts below and let us know what you would like us to discuss in future posts! You can subscribe to be notified of our next post by visiting www.trackernetworks.com/observations.
Miles Smit, PhD
Tracker Networks is a Toronto-based software company that offers a suite of risk tracking solutions including AppTracker and Essential ERM. Essential Erm offers no-nonsense risk tracking. It is simple, visually appealing, powerful and a breeze to implement.