Managing Business Risk with IsoMetrix
Forecasting and planning in today's complex business climate is extremely difficult. Unprecedented risks in the form of legal, regulatory and business policy directives, and value chain requirements are common. So how can organisations control and manage risk while driving up business performance and improving sustainability, asks Paul de Kock, MD of IsoMetrix
It has been argued that risk ignorance result in the so-called "iceberg of risk "where the full risk exposure is submerged and risk at an enterprise level is not visible to senior management.
"Risk is often managed in organizational silos like financial, process safety, environmental, health, safety and quality that do not communicate," says De Kock.
"Many organisations may very well fail when they are not aware of the full scope and interdependency of risk across the business."
The concepts of governance, risk and sustainability are no longer the exclusive domains of individual business units. As a result, organisations are expanding their initiatives to encompass a much more integrated view of risk management in their quest for sustainability.
This holistic integrated approach is strongly driven by a number of factors. Customers, employees and partners are deriving their expectations from an environmental, social and governance perspective. Specialised portfolios based on corporate behaviour are being offered by institutional investors and insurers.
Where corporate assessments are undertaken, rating agencies are looking at risk management as a component, and risk management is now part of the evaluation criteria for merger and acquisition due diligence. More and more legislation is requiring defined risk management strategies. Also, corporate social responsibility (CSR) pressures are stronger and publicly visible, and environmental and social changes are rapid and significant.
"This growing focus on risk and reporting has led to an increased demand for timely, reliable data that can be easily accessed. The ability to communicate risk and to justify decisions is becoming increasingly important," explains De Kock.
RISK DATA MANAGEMENT SOLUTIONS
Much of today's risk records and data exist in unstructured storage environments and formats such as MS Word documents, Excel spreadsheets, PDF and PowerPoint files. Organisations need to be able to access the data used, regardless of where it resides and what format it is in. Many expend much energy. Manpower and time generating risk related data that they don't really trust Data is often inconsistent, outdated, inaccurate, doesn't fit the purpose, is low quality, unprotected and, most importantly, inaccessible.
Companies that trust their risk management data can generate more value from the data and fulfil their objectives more effectively. Because of the nature, extent and variety of data generated thorough risk management initiatives, trustworthy data can only be achieved through the deployment of an integrated risk management data solution. Such solutions must not only document risks but must integrate all the management components needed to understand and manage them. The integrated software solution must include, as a minimum all the components as illustrated in the chart.
According to De Kock, an effective software solution must remove data complexity, comply with legal, industry, document and any requirements, and eliminate data redundancy by considering all technology and systems already in place. "The software should be built using technology which is best practice in terms of ensuring data reliability and consistency," he states. "It should also increase data efficiency whilst decreasing the effort and time spent on capturing data and reporting management information."
The long-term cost of implementing a risk management software solution can be controlled if the correct process and policies are implemented from the start. When entering into a partnership with a software vendor, be sure to ascertain whether their solution is flexible enough to meet your organisation's specific requirements and unique situation.
Download this article in PDF format - Managing Business Risk with IsoMetrix