How Risk Management Technology Projects Succeed

CMS Wire's Norman Marks recent article, "Why Risk Management Technology Projects Fail," captures a common but limited viewpoint of Risk Management that limits its ability to succeed in any environment, whether supported by software, spreadsheets, or pen & paper.

"To be successful, a risk program has to be designed to enable managers to make intelligent, risk-informed decisions every day. The requirements have to include the perspectives of both the risk officer and of management... You need to enable managers to see both performance and risk status for each of their objectives and strategies."

A risk based program can only be successful if it applies the iterative ERM Process Steps (Identify, Assess, Evaluate, Mitigate, Monitor) to not just risk, but also performance, compliance, and every other governance function throughout the organization.

Risk Based Compliance

Risk based compliance has been interpreted many ways - with very few adding value to the compliance professionals. But if we examine Compliance in the framework of the ERM Process, it looks something like this.

Identify requirements (legal, regulatory, internal, etc.). Assess the applicability of requirements (typically Yes, No, or Not Applicable). Evaluate whether further action is necessary. Mitigate with policies & procedures (how you meet the requirement).And finally, Monitor through audit's testing of controls and your adherence to internal policies.

The same exercise can be conducted with governance processes, but why does it help to apply the ERM process to all Governance, Risk, and Compliance (GRC), functions?

Risk Based Performance

The process works equally well for performance. Objectives and goals are identified and assessed based on their positive impacts if achieved, the likelihood of achievement, and their general timeframes. They can then be supported with activities and projects (in effect, mitigating the changes they are not realized), and monitored with performance metrics and KRIs.

The same exercise can be conducted with governance processes, but why does it help to apply the ERM process to all Governance, Risk, and Compliance (GRC), functions?

Value of Risk-Based Process

By standardizing governance with a risk based process, you enable the re-use of information and relationship building that creates efficiencies throughout an enterprise. Controls used to mitigate risk might also be the same controls ensuring your organization stays compliance. Regulatory requirements have risks that should be associated with them. Metrics and testing that indicate the effectiveness of your control environment can also be used to drive audit scoping and resource allocation.

The possibilities with a Risk-Based approach are numerous, but cannot be realized without the support of an ERM Taxonomy and Risk Management Software. The reason Risk Management Technology projects fail is that they take a silo-specific view of risk management, rather than viewing risk as the common link between performance, compliance, and enterprise governance.

Votes: 0
E-mail me when people leave their comments –

Steven Minsky, CEO and Founder of LogicManager, is a recognized thought leader in risk management. Steven is well known for his precinct abilities to guide organizations through future risk events. Steven is a frequent speaker in the Energy, Financial Services and Cyber industries. While the first wave of COVID-19 caught many organizations by surprise, Steven predicted the pandemic impacts in January of 2020 and swiftly published action plans to help organizations prepare.

You need to be a member of Global Risk Community to add comments!

Join Global Risk Community

    About Us

    The GlobalRisk Community is a thriving community of risk managers and associated service providers. Our purpose is to foster business, networking and educational explorations among members. Our goal is to be the worlds premier Risk forum and contribute to better understanding of the complex world of risk.

    Business Partners

    For companies wanting to create a greater visibility for their products and services among their prospects in the Risk market: Send your business partnership request by filling in the form here!