BEYOND COMPLIANCE: PROPERLY LEVERAGING ERM FOR ADDITIONAL VALUE
While many companies leverage enterprise risk management (ERM) from a compliance perspective, the approach is much more than just a one-way street. Too often, risk management efforts focus on regulatory and compliance demands versus strategic and business objectives. However, changing the perspective of ERM can be a competitive differentiator, creating additional operational, cultural and financial advantages for any organisation.
In today’s challenging risk atmosphere, greater insight into the management of key risks is an immensely valuable asset. Satisfying regulatory and compliance risk obligations is certainly important, however, a more holistic view of risk, encompassing both opportunities and threats, can help effectively manage compliance demands while achieving business and strategic objectives.
The American Institute of CPAs’ 2015 ‘Report on the Current State of Enterprise Risk Management: Update on Trends and Opportunities’ found that the majority of companies surveyed only minimally viewed their ERM processes as a proprietary strategic tool. The findings did not greatly differ between middle market companies and larger organisations, reflecting missed opportunities to create a competitive advantage in businesses of all sizes.
So how should an organisation begin to expand the scope of risk efforts to be more strategic? To change the perspective of ERM, the business objectives need to be the starting point to any enterprise risk assessment. If ERM is not based on and linked to business processes, risks can surface that distract management from critical risk areas. Integrating ERM and strategy will help management better understand the underlying assumptions, threats and opportunities to the plan.
Apr-Jun 2016 Issue
RSM US LLP