Current economic conditions are driving changes to companies’ risk management strategies, and even smaller companies are being forced to take a more strategic approach to managing risk. One way to take this strategic approach to risk management is with enterprise risk management (ERM) – a business strategy gaining widespread acceptance in businesses across the country.
The ERM process allows organizations to better manage their risk. But is it appropriate to your small or medium-sized business? Almost certainly.
Until recently, this system has been implemented primarily in large corporations. But, according to Jay Vadiveloo, actuary and ERM specialist, it may be time for the small-business sector to adopt the ERM approach: “With all of the uncertainty and turbulence in today’s economy, positioning small businesses to mitigate risks and maximize opportunities has become key to their survival and success,” he suggests in a Huffington Post blog posting.
ERM helps businesses of all sizes manage an organization’s key business risks and opportunities. Whether the threats are internal like auto losses or external like supplier problems, business owners must recognize and manage forces that could disrupt their companies.
Opportunities must be managed, as well. ERM is set up to ensure that everyone in your company has access to important information relating to potential problems and opportunities.
Why is this information flow important? In many organizations – even smaller ones – everyone is too preoccupied with getting the job done to make a point of sharing information. As a result, vital information ranging from financial concerns to corporate strategies and employee relations is centralized with a few of your key people. It may even reside exclusively with you, never reaching your employees.
This means that essential decisions are often made without adequate information. Employees don’t always intend to hoard information, but even in a smaller organization, there may be personality conflicts and disagreements that limit sharing of information. It’s incumbent on you as the boss to ensure that information is shared.
With an ERM approach, your employees are encouraged to identify roadblocks or hazards that could interfere with your strategic goals.
The same is true of opportunities. For example, if one employee learns of a way your inventory management can be improved but doesn’t think to share this information with his or her supervisor, your business may lose out on a system that could have helped floor the competition.
Strong communication is the basis of ERM. Every one of your employees – salespeople and supervisors alike – should be empowered to consider and discuss ways of identifying potential problems and taking advantage of opportunities.
If, as the owner of a small business, you decide to implement a formal enterprise risk management system, you may need the services of a consultant. However, companies of all sizes can benefit from the approach without signing up for a full-fledged implementation.
Ensure every employee has access to information, and empower each one to look for both problems and opportunities and share his or her findings with a supervisor. Risks will be controlled and opportunities acted upon.