The Role of Enterprise Risk Management

The management of risk is coordinated set of activities designed to manage and protect a company against potential threats, whatever their involvement, this entails planning and use human and material resources to minimize risks or treat. 

It is a strategy that involves the preventive work of anticipating possible situations and considering the practice as part of the company's processes, but it also includes acting in a prescriptive way, that is, when the risk manifests itself without having been foreseen. 

In this case, risk management seeks to promote a dynamic behavior in the company so that it can respond quickly to events, uncertainties and changes of scenery, the final objective is always the constant improvement of the company's processes. 

Types of risks 

Risk is an effect that is triggered by certain circumstances, a deviation from the course and the objectives set by the administrators, as well as an event, a circumstance or a future condition, some cases that can occur within a companyThe origin of the risk may be financial "external or internal", operational, related to human failure, incompetence of the administrators or due to issues inherent to the activities carried out. 

Recognizing the origin is important, but the role of risk management solutions is not to seek justifications, but to act to prevent these risks from turning into negative consequences for the company, if it has been done, we must work to mitigate these consequences, manage the possible crisis and generate actions to avoid its recurrence in the future. 

Key steps for risk management 

To establish an effective risk management policy in a company, it is necessary to consider the following steps: 

Organize the environment: Define the employee or sector responsible for risk management, ensure their training in the area and define permanent processes. 

Risk identification: The first step is, from the knowledge of the company's objectives, to recognize which risks must be considered and managed. 

Risk measurement: Not all risks have the same importance, in this phase, their probability and possible impact on the organization must be calculated, in qualitative and quantitative analyzes. 

Risk response: Define what actions should be taken to avoid, reduce or divide risks or turn them into opportunities rather than threats. 

Risk control: Verify if there were residual risks, new risks, or if the planned actions had the expected result in order, where appropriate, to promote changes in the strategy. 


Forms of Risk Management 

As is well known, the higher the risk of an activity or business, the higher its profitability may be, this fact exerts intense pressure on the management to have an adequate level of risk, proportional to the risk profile of the company. 

It is critical that managers have the skills, systems, methods and tools to administer and manage risk on a routine basis, these are the forms of risk management that should be used. 

The following are some of the forms of risk management in companies: 

Market risk management: It must prepare the company for fluctuations in the prices of the raw materials it uses and other resources. 

Credit risk management: It aims to protect the company from possible loss of income from credit sales. 

Liquidity risk management: Maintain the company's treasury with sufficient resources to meet business obligations. 

Operational risk management: Be attentive to external factors, such as the weather, legislation, the economy and others, as well as internal factors, such as strikes, lack of maintenance, etc., which can cause the paralysis of the company operations. 


Risk management applications 

The way forward requires adequate methods and tools to map critical processes, operations, identification and consequent reduction of potential damage from relevant risks is also an essential part of risk management. 

Monitoring and internal control activities should be adjusted and improved based on risk, another important process in choosing risk management methods is structured communication about business risks between the areas of the organization, this should be a priority in the administrator's agenda for the success of any program or project. 

Processes with a high level of compliance end up having more satisfactory results, this is because, when all the people committed understand what the purpose is and how they collaborate with risk mitigation, companies develop better. 


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