Benefits of Enterprise Risk Management
Enterprise risk management ensures that a business identifies and understands the key dangers that it may face. This helps the company make and implement necessary plans to prevent loss and also reduce the impact if losses occur. The following are other benefits of enterprise risk management.
1. Promotes effective communication
Enterprise risk management enhances communication within a whole company. The reason for this is that risks will be tackled by several interdepartmental teams, instead of individuals only. This encourages better communication amongst employees, stakeholders and management board regarding how risks are being controlled. Moreover, frequent meetings aimed at reviewing the risks also help to boost employee morale.
2. Boosts awareness
Being unable to identify a risk until it happens can really affect a business negatively. Actually, this may cost an organization a lot of money. It may even result in a decrease in internal morale as well as destroying the company’s reputation. Nevertheless, enterprise risk management enables managers to identify risks early, empowering the business to sort and then highlight the threats.
3. Enhances accountability
Having established clearly the possible threats, managers in a business can proceed to allocate the suitable staff to remove them. In certain cases, the services of external experts may be required for even more effectiveness in dealing with the risks.
4. Detects opportunities
Enterprise risk management involves the location and removal of threats and this helps in presenting a business new opportunity. Where there is difficulty in dealing with risks, a company is afforded a vital chance to assess and also strengthen its internal procedures. In addition, enterprise risk management offers the chance of using new ways of performing business duties and good substitutes if any risk occurs.
Enterprise risk management has several disadvantages as well including that it may stop an organization from expanding if high risks are involved in taking that action.