Most people do not understand why organizations need dedicated erm software solutions to manage enterprise risk, but that is only because most people do not understand how vital enterprise risk management can be. Managing risks is simple in our personal lives and for small businesses, because only a few risks need to be worried about. There is no need to quantify and assess these risks, because it is easy to keep track of them all due to their low quantity and small size. However, when we start looking at bigger organizations the picture completely changes.
The importance of knowing risks for businesses
If you want to understand why enterprise risk management is so important an analogy will help. Think of a small business as a small boat. If you take out a small boat, there are many risks you need to worry about. You know your boat can easily capsize and you need to stick to low currents to stay safe. Now, compare it to a large business, which is basically a large ship. The large ship can withstand a lot more turbulence and will not capsize. In a way it can be said that the big ship has more protections than a small boat.
However, when you look at the actual function of both boats it becomes abundantly clear that the big ship carries higher risks. On a small boat it is going to be just you and a few more people. If you are in a small boat, you will not use it for long trips which can result in you being adrift at sea. The same is true for small businesses as well. While small businesses are vulnerable, they are not very high risk because of their limited size. The risks they face are clear and immediate – they need to worry about the weather, the motor powering the boat, and they need to carry a few floats to make sure they will be safe if the boat capsizes or faces any other issue.
Now, look at the risks which a big ship must manage. These ships have hundreds of employees managing everything. There are multiple engines and countless other pieces of machinery which are running the ship – all of them need to be maintained. There needs to be an evacuation route for emergencies for people working below the deck. There is an immense amount of fuel and other perishable goods on the ship that need to be protected. While the ship can withstand a lot more pressure than a small boat, a problem in a big ship can also be a lot more catastrophic than anything that can happen to a small boat.
Enterprise risks are complex
This is why ERM software is needed. The captain of the small boat does not need to keep track of a lot of things. They can do everything they need to do without the use of any specialized tools. They can manually look into every problem and assess all the inventory before every trip. The same is simply not possible for someone who is the captain of a big ship. There are too many things to keep track of – there is simply no way for the captain to be able to run the ship without the use of dedicated tools. They have multiple people whose sole purpose is to monitor everything. They have screens giving them data about every piece of machinery on the ship. They have sensors telling them about the external and internal environment of the ship. They have communication tools that get external data regarding weather and currents to help them chart the right course for the ship. All of this is necessary, because there are simply too many things to manage manually.
This is what risk management software does for large organizations. It gives them all the information they need in a single centralized location, so the board knows what is going on within the organization. Without such a software it is possible that they may lose track of the risk related problems within the organization or they may be blindsided by an issue they should have been tracking.
ERM software is now a common sight in all large organizations. Some smaller businesses have also started using these solutions. While it may not be essential for smaller organizations, there are now many inexpensive ERM solutions available in the market which are easily affordable for small businesses. Small business owners are thus utilizing these solutions at a low cost to gain access to technology which was previously only available to large organizations because it cost millions of dollars.