A concept ever-present in our business lives, risk can be defined as an uncertain element or outcome involving harm, loss, or danger. In other words, Risk is the probability of something having a negative impact on objectives.
There can be many risks in your business and its processes. These risks should be properly managed to eliminate or minimize the damages they can cause to the business. Enterprise risk management is crucial for the proper progression of processes within your company, ensuring the continuity of business activities by managing risks and minimizing potential losses.
So, what should be done for risk management?
Firstly, strategic planning should be done to create the risk management model and identify risks. Then, using a Risk matrix, the probability of risk occurrence and its impact should be examined. Thus, the severity of the identified risk can be measured. Risks are prioritized according to their importance. This prioritization shows us the order in which we should start working, essentially outlining our action plan.
• Avoiding the risk
• Reducing the risk
• Sharing the risk
• Accepting the risk
such risk mitigation tools are used to take actions to reduce the effects of risk. Thus, risks are minimized. Evaluation and control processes along with pre-risk and post-risk analysis are carried out. After risks are mitigated, continuous monitoring and control practices are implemented to ensure the continuity of the new situation resulting from risk management, which is crucial for the continuity and efficiency of businesses.
At this point, ERP systems support your Enterprise Risk Management process. With information flow, various approval processes, and data analyses within the system, risk management becomes easier. Risk assessments can be made timely and accurately in light of the real-time data provided by the system.
A properly designed Enterprise Risk Management process supported by the right ERP system can minimize risks, enhance business performance, increase efficiency, and provide a competitive advantage. While reducing financial losses, it prepares the business for internal and external threats. Moreover, it will bring about a positive cultural change for companies.
Remember! If you can’t manage the risk, you’ll have to manage the crisis…”
