Enterprise risk plans and management should not only be the standard across businesses, but when implemented properly, they can drive growth and profits. Here are a few ways you can achieve this within your business.
Improved Decision-Making
One of the most significant benefits of enterprise risk management and plans is the significant improvement in your decision-making. A risk plan not only identifies risk, but also balances it out with the potential reward, allowing you to see more clearly when it comes to which decisions you should and shouldn’t pull the trigger on.
This balance also helps you to identify long-term benefits, instead of making a snap decision for a short-term prize that could come back and haunt you in the long run.
Enhanced Risk Awareness
When risk becomes a focus at the senior level, this will almost always trickle down throughout the business, and everyone becomes more risk-aware. This means that risk becomes something to talk about, and not something to push aside and potentially miss out on amazing ideas.
When risk is something everyone is aware of and considers, then it is far easier to avoid it and, in turn, avoid a potentially catastrophic mistake.
Better Use of Resources
A thorough ERM can identify where resources are either being overused or underused. This then leads to companies being able to reduce or eliminate redundant processes or procedures, resulting in more efficient resource utilisation and cost savings.
This also means that more money and resources can be put towards what does matter and what is most important.
Reduced Unexpected Losses
Unexpected losses are a massive threat to growth, but there is no need to worry about it when you have an efficient and effective ERM in place. Risk management accounts for potential issues and threats you may face in the future, and helps you create a solution for them now.
For instance, cyber threats are prevalent nowadays, but if you have an exceptional cybersecurity framework and a cloud or third-party server backup of all your data, then the overall ramifications of a breach are minimized.
Calculated Innovation
Innovation is a must for growth, but innovation also comes with a lot of risk. Whether it be resources, money, or a combination of both, the risk of “losing” when taking the next step is a significant consideration.
However, a risk management plan puts everything into perspective and allows you to take a more calculated and informed approach to innovation. Being able to minimize the risk of loss while still taking steps forward is an incredible balance.
Stakeholder Confidence
When you have a transparent risk management framework, it can be a signal to investors and stakeholders that your business is stable and ready for growth. This can, and often will, lead to more investment and better access to capital.
Business Continuity
In the face of either a local or worldwide crisis, being able to continue as a business will put you ahead of your competition. Part of a risk management plan will include a business continuity plan, or BCP.
For example, if there is a natural disaster that cuts off resources or your workforce for an indefinite period, a BCP accounts for this and provides the blueprint that allows you to continue.
Competitive Advantage
When you are able to balance risk with innovation, you give yourself an advantage over your competitors. This is because you are able to enter new markets, create new products, or pivot in a new direction more confidently and with limited risk.
This puts you a step ahead when it comes to jumping onto new trends early, or adapting your products to a new need before your competition is able to.
Operational Efficiency
A risk management plan will also include reviewing your processes to find bottlenecks, compliance or fraud risks, waste, etc. When you can identify these issues, you can streamline your processes and make them substantially more efficient.
When you can streamline existing processes, you can free up resources and employees that can be used elsewhere, making scaling and expansion easier.
Cybersecurity Trust
When it comes to growing online services, e-stores, etc, trust from customers is a must. A robust cybersecurity system for both your business and individuals, that limits or eliminates the risk of data theft and hacks, is an excellent sign to customers that they can trust you with their data.
As mentioned earlier, in this day and age, one of the biggest threats to many companies is online, and therefore, it is a must that online safety and protection are a priority.
Improved Capital Allocation
Successful companies thrive on ROI, and therefore, being able to make decisions and pivots that maximize ROI is a must. When you have clear insight and knowledge as to where risk lies, you can allocate capital better, and therefore increase the return of the investment.
In conclusion, enterprise risk plans not only make your company successful and profitable today, and put you in the driver’s seat when it comes to future growth. Whether it be profitability, innovation, being a step ahead of your competition, or all three, enterprise risk plans and management could easily be seen as the secret ingredient you need for success.
