How can you ensure the sustainability of your ERM framework?

An effective governance structure is the backbone of your ERM framework. It defines who does what and ensures that risk management responsibilities are distributed appropriately across the organization. Your board of directors and senior management play a pivotal role in setting the tone for ERM. They should provide oversight, strategic direction, and allocate necessary resources. Within your organization, specific individuals or teams should be designated as risk owners. These are the people who understand and manage the risks associated with their areas of responsibility. Consider establishing risk committees or councils that bring together experts from various departments.

Once the ERM framework is adapted to your business environment, then always "think outside the box" and be ready to modify your program to address the ever-changing environment.

To sustain a robust Enterprise Risk Management (ERM) setup, I'd first ensure everyone's on board with a clear vision backed by a strong governance structure. This would clarify roles and sync the ERM with our core objectives. Periodic evaluations would keep the ERM relevant and adaptable to our evolving needs. Emphasizing Environmental, Social, and Governance (ESG) risks would prepare us for future challenges. I'd also fold sustainability directly into our ERM practices. Lastly, the heart of our ERM would resonate with our company's core values, mission, and vision. Remember, a future-focused ERM isn't just about managing risks—it's about thriving amidst them.

I've observed that the sustainability of an ERM framework isn't just about structure, but about culture. A vision is only as good as the people who bring it to life. I recall a project where despite a robust ERM framework, risks went unnoticed because employees felt detached. The lesson? Engage your team at every level. Regularly host workshops and feedback sessions. When people feel ownership, they become vigilant gatekeepers. And remember, in this ever-evolving landscape, adaptability is key. Periodically review and refine your framework, ensuring it remains relevant and resilient.

Your ERM framework should be founded on a clear vision of how risk management supports your organization's mission and values. It should directly tie risk management activities to the achievement of strategic objectives. Also , integrate risk management seamlessly into your organization's decision-making processes. Ensure that risk considerations are embedded in strategy formulation, project planning, and daily operations. Clearly communicate the value proposition of ERM to all stakeholders. Explain how it contributes to enhancing resilience, protecting assets, and ultimately achieving long-term success.

An aligned ERM framework optimizes resource allocation by ensuring that resources are allocated to areas where risks are most critical to strategic goals. It prevents wastage on low-impact risks and focuses investments where they matter most. By aligning risk management with strategy, organizations can strike a balance between risk and return. This means they can pursue opportunities that align with their strategic vision while managing and mitigating the associated risks effectively. Ultimately, aligning your ERM framework with your strategy positions your organization for success. It allows you to steer your efforts toward the achievement of your strategic goals, with a keen eye on the risks and opportunities that lie along the path.

Being a firm believer of data-driven practices, collecting financial and operational data and performing the neccessary analysis and analytics towards strategy can effectively guide flexibility and maintain objectivity. It's hard to come by clean and organized data, so risk teams are put to the task, but it is pivotal to have data-driven reports in place especially at the early stages of putting up a governance framework.

A consistent and flexible ERM methodology is the bedrock upon which effective risk management is built. It provides organizations with the tools, techniques, and strategies needed to identify, evaluate, treat, and monitor risks systematically. Also by adopting such an approach, organizations not only standardize their risk practices and enhance their risk capabilities but also ensure they are prepared to adapt to changing situations and needs. In a world where risks are dynamic and multifaceted, a resilient and agile ERM methodology is the compass that guides organizations toward sustainable success

Stakeholder engagement is not just a checkbox in the risk management process; it's a powerful tool for strengthening an organization's resilience and reputation. By actively involving employees, customers, suppliers, regulators, investors, and other stakeholders, organizations can tap into a wealth of diverse insights that enrich risk management practices. In a world where risks are multifaceted and dynamic, the collective intelligence and collaboration facilitated by stakeholder engagement are invaluable assets. Organizations that recognize and harness the power of their stakeholders in the ERM framework are better equipped to navigate uncertainties, respond to emerging threats, and sustain long-term success.

Based on your findings, implement necessary changes or enhancements to your ERM framework. This may include updating risk policies, procedures, or guidelines to align with current best practices and industry standards. Improve the tools and reporting mechanisms used in your ERM framework. Ensure that they provide timely and accurate risk information to decision-makers and stakeholders. Invest in ongoing training and education for employees involved in risk management. Ensure that they are well-equipped to identify, assess, and manage risks effectively. Incorporate scenario planning and stress testing into your risk management practices. This enables your organization to proactively prepare for a range of potential future scenarios.

It is important to have alignment before creating an ERM program than going straight into a risk identification activity. I like to use the Golden Circle from Simon Sinek in these situations. Team members, leaders, and stakeholders have to agree and explain the How, What, and Why of ERM for your organization. An organization needs to know WHAT they do i.e., provide products and services ). Then, How their product and services stand out. Lastly, Why the organization achieves its purpose/mission. Then, ERM is the framework to assess strategy execution and the risk landscape for desired goal outcomes. Have an annual check in with stakeholders on alignment to assess ERM maturity and where the program can be better.

In a business world characterized by constant change and uncertainty, the role of ERM has never been more critical. Organizations that recognize the importance of regularly reviewing and enhancing their ERM framework are better positioned to maintain risk quality, optimize operational efficiency, and remain adaptable in the face of evolving risks and opportunities. By embracing this ongoing cycle of improvement, organizations can not only strengthen their risk management practices but also enhance their overall resilience and competitiveness.