Enterprise Risk Management (ERM) is a systematic and proactive approach to managing all of an organization’s risk. ERM is rapidly emerging as the risk model that many organizations and governments are now following.
An organization needs to prepare itself prior to implementing an enterprise risk management framework. While there may be resistance and limited buy-in by stakeholders at different levels of the organization there are things that you can do to facilitate a smoother transition from traditional risk management to ERM.
Quick Tip ERM often meets with resistance at different levels by stakeholders. |
Small, manageable steps are important. Introducing ERM can produce culture shock for an organization. The personnel implementing the change should acknowledge the challenge. Most advisors recommend a small series of manageable phases.
Dimension the Task - This involves three areas:
- Operations Affected - What units will be involved at each step?
- Sources of Risk - What risks will be included (hazard, operations, financial)?
- Processes to be Used - Will the organization formalize risk identification, measurement, or financing for each area?
- Respect the existing culture - The organization has been managing risks for a long time. Early efforts should be recognized and not disrupted needlessly.
Quick Tip When Implementing ERM take the time to build consensus and get buy in. |
A change in culture involves activities such as: - Education. The organization should provide programs so key managers have a chance to learn about ERM, understand how it will be introduced to the organization, and the role they will be asked to play.
- Training. The enterprise will have to undertake new tasks with existing people. Computerized systems may be installed. Individuals must be trained on the new systems.
- Communication. Messages should be disseminated to all affected people, seeking buy-in from the top to the bottom of the organization. The messages should include individuals who are not directly involved in implementation.
- Incentive Programs. The organization may want to install benefits, either individual or unit, to encourage quick results. Small rewards can motivate individuals and departments to participate.
Prepare for Obstacles - Difficulties will arise when lowering barriers between operating units. Money and organizational resources may be needed, reducing funds for other activities. Resistance to change may produce objections even at senior levels.
Start to Make Changes - Begin the process! Solve problems as they arise. Expand the effort when the timing is right.
Feedback - Monitor the reception and results. Make changes as needed at each new phase.