Importance of Conducting Independent Assessment For An Enterprise Risk Management Function

The saying goes, “If it ain’t broke, don’t fix it.” However, in the culture of today’s business market, the saying should be adapted to say, “If the existing risk management program is working, still see if there are areas for improvement with an independent assessment.” The reason is that enterprise risk management (ERM) programs are structured plans designed to be consistently organized and responsive to the risks facing an organization. With a task as vital as ERM programs, businesses can only benefit by learning how to adapt as risks change, to manage accountability and to grow from their existing risk management strategies.

Below are nine reasons to conduct an independent assessment of existing ERM programs:

1. Manage Accountability For ERM programs

Businesses can stay alert to new risks by keeping their existing ERM programs accountable for protecting business practices. Independent assessments allow a team outside of the company to establish a plan and prepare a review. With this independent outlook, companies can gain a new perspective to see if existing ERM programs are working as expected.

2. Adjust ERM Programs Before A Problem Occurs

An independent assessment allows for ERM programs to be monitored and adjusted without the need for problems to arise first. Companies can benefit from preventing an oversight of risks by saving their team the hassle of regrouping after a catastrophe. If done regularly, an independent assessment of ERM programs will allow companies to be ready for facing risks on their own terms.

3. Set New Objectives Within A Familiar ERM Framework

By working to assess existing ERM programs, companies have the advantage of already understanding the strategies in place. There is a familiar framework with which to study the success and pitfalls of previous attempts to manage risks. Therefore, existing ERM programs have the potential to be reorganized as a means of reflecting new objectives without disrupting current plans for overseeing risks.

4. Develop A Forward-Thinking ERM Mindset

Creating a cycle of growth that looks toward the future is a key goal for independent assessments. Rather than keeping stagnant programs that require an overhaul to change, companies can build on risk management measures as they see fit. Independent assessments encourage a business to refine performance with proper planning and implementation of the review.

5. Enhance Resiliency With Existing ERM Programs

Existing ERM programs have the potential to become resilient, or at least more effective, at managing uncertainties. By assessing the ERM programs over time, companies can learn how to predict new patterns in the risks. Anticipating risks that present themselves in new forms allows businesses to build resilience in the face of ever-changing new uncertainties.

6. Adjust ERM Programs With An In-Depth Review

Because an outside team conducts independent assessments, companies can have an in-depth and a new perspective on their existing ERM program. Sometimes an outside look will be all it takes to identify the gaps within an ERM that have prevented a company from successfully navigating risks before.

7. Build Customer Assurance Over Time

Independent assessments of ERM programs help establish loyalty among the customer base. Customers can gain a greater confidence in the company knowing that ERM programs have been reviewed by an outside source, which vouches for a company’s ability to withstand new risks or shows that a company can adapt as necessary. As a result, companies have greater chances of receiving positive credit ratings.

8. Mitigate Risks Relevant To Current Business Practices

ERM programs need to work for a company so that current practices, as well as new ones, are covered under risk management. Independent assessments assure that whatever changes are made will reflect what the company needs as far as risk management from their current state. Because the existing program is under review, companies will also learn how to improve safety for their business moving forward.

9. Gain A Competitive Edge By Assessing Existing ERMs

ERM programs that have been independently assessed for efficiency can give a company a competitive edge. Along with the previous reasons, companies save time by assessing ERM programs before catastrophe strikes, which frees companies up to work with customers with minimal interference from risks. More time to focus on conducting business means companies can outshine their competition.

Conclusion

Companies gain new insights by independently assessing their existing ERM programs rather than creating new ones each time a problem arises. The chance to manage accountability, foster resiliency and mitigate risks that are relevant to the business are all necessary for establishing a greater trust with the customer base. Independent assessments encourage a forward-thinking mindset that allows companies to adapt as they become more effective and efficient at conducting their business.