Risk is everywhere. Whether you’re driving to work, investing in the stock market, or starting a business, there’s always a chance that something unexpected could happen. But for many companies, the stakes are often much higher. A single mistake or oversight can lead to financial losses, reputational damage, or even legal troubles.
If you’re running a business, you’re likely aware that risk is inherent in every aspect of your organization. From your operations to your financial stability, there are risks that can derail your success at every turn.
That’s where enterprise risk management (ERM) comes in. For companies seeking to manage risks proactively while driving growth, ERM offers a holistic approach that helps businesses identify, assess, and manage risks across all aspects of their organization. Instead of simply reacting to problems as they arise, one of the biggest benefits of enterprise risk management is that it allows companies to anticipate and prepare for potential risks, reducing the likelihood and impact of negative events.
But ERM isn’t just about avoiding unwanted outcomes. It’s also a powerful tool for driving growth, improving performance, and gaining a competitive edge. By taking a holistic view of risk, companies can identify opportunities for innovation, optimize their operations, and make more informed decisions.
In this article, we’ll discuss the numerous business benefits of enterprise risk management and how it can help your business thrive.
ERM Benefit #1: Enhance decision-making with accurate risk data
Enterprise risk management can enhance decision-making by providing a structured and systematic approach to identifying, assessing, and prioritizing risks across your organization. By integrating risk management into decision-making processes, organizations can proactively address potential risks and seize opportunities for growth and innovation. Additionally, aligning your risk management program with globally accepted risk assessment principles and frameworks, like ISO 31000 and COSO ERM, can help standardize your risk management approach and promote consistency across the organization.
Access to accurate and timely risk data — with the help of enterprise risk management software — can help you make informed decisions that drive your business forward. Centralizing your risk data enables you to understand the current state of risk across the organization, track risk trends over time, and prioritize areas for improvement.
ERM Benefit #2: Streamline risk assessment and management processes to build resilience
Next on our list of the benefits of enterprise risk management is the fact that it can help businesses streamline their risk assessment and management processes. By eliminating manual processes, companies can focus on delivering actionable insights to help them make informed decisions.
Connecting compliance, audit, and risk functions in a single program or platform can improve collaboration and provide a more holistic view of risks across the organization. By taking these steps, businesses can better identify and manage risks, which can help them stay ahead of potential threats and gain a competitive advantage in their industry.
But effective enterprise risk management also helps you better engage the first line. Tying risk to objectives and developing a risk culture that delivers actionable data and insights can help drive better business decisions and improve the bottom line. With an ERM program in place, businesses can set risk tolerances and monitor risk metrics in real time, which can help them stay ahead of potential threats and respond more effectively to challenges.
ERM Benefit #3: Improve operational costs and efficiency
Implementing an ERM program can improve operational efficiency in several ways. By identifying and assessing risks across the organization, enterprise risk management can help prioritize allocating resources to address the most critical risks. This allows organizations to focus their efforts on areas with the highest risk and reduce the likelihood of operational disruptions.
ERM can help standardize risk management processes, improving efficiency and reducing duplication of effort. This adds to the benefits of enterprise risk management as it can also help ensure that risks are managed in a coordinated and consistent way, reducing the likelihood of surprises and increasing the organization’s ability to respond to unexpected events.
ERM Benefit #4: Increase access to capital
Organizations implementing ERM have shown a better ability to pay off their financial obligations, leading to increased access to capital. This means institutions and creditors are more likely to lend money to these companies.
An example from Ohio State University explains the benefits of enterprise risk management in a situation where a company needs to reduce its required level of equity through the use of ERM. They outline how positioning themselves “at the margin” in order to be “indifferent between decreasing risk and increasing capital” can aid in receiving financial support. That’s because it allows them to achieve a combination of risk management and capital, allowing institutions and creditors to be satisfied.
For instance, if the organization needs $5 billion of equity capital, making the decision to spend $10 million in order to decrease risk by one percent will show financial institutions that the company is, in fact, saving $10 million in equity capital costs.
One of the key benefits of embedding enterprise risk management practices in your business is that it shows potential lenders and shareholders that you’re serious about identifying and managing risks. Giving lenders and investors more confidence in your ability to pay back the money you borrow builds trust and can increase your access to capital.
Businesses that include a measure of ERM in their evaluations are seen as more likely to pay their financial obligations. Implementing ERM is a strategic move if you want to grow your business through capital investments.
ERM Benefit #5: Reduced insurance premiums
It might seem obvious, but insurance companies want to know that the businesses they insure are taking steps to effectively manage their risks. This adds to the benefits of enterprise risk management as it provides organizations with a comprehensive risk management framework to mitigate potential losses or damages.
For example, if a company identifies potential risks and preemptively takes steps to address them, the insurance company may see that as a positive sign of risk management. This can lead to lower insurance premiums because the insurer considers the business a lower risk.
On the other hand, if a company does not have a robust risk management framework in place — or has yet to take steps to address potential risks — the insurance company may view it as a higher risk and charge higher premiums.
It’s important to note that the extent to which ERM can reduce insurance premiums will vary depending on the nature of the business and the risks it faces. But in general, by proactively managing risks and demonstrating a commitment to risk management, your organization will see the benefits of enterprise risk management through lower insurance premiums and less money spent on insurance costs.
ERM Benefit #6: Quantifying value
One of the biggest benefits of enterprise risk management is the value it adds to your business. However, it can be challenging to quantify the benefits of something like ERM in a way that executives and stakeholders can easily understand.
By implementing ERM, a company may be able to reduce the likelihood of a costly incident, such as a data breach or a product recall. This, in turn, can save the company money by avoiding the expenses associated with dealing with such incidents. Tracking those gains through an enterprise risk management system can make reporting the overall benefits of your program and efforts as simple as clicking a button.
Another way to quantify the value and benefits of enterprise risk management is by looking at its impact on the organization’s reputation. By effectively managing risks, a company can demonstrate to customers, investors, and other stakeholders that it takes risk management seriously and is committed to protecting its stakeholders. The potential for increased trust and confidence in the company can often translate into increased brand value and customer loyalty.
Some benefits, such as improved stakeholder trust, may be intangible, while others, such as the cost savings associated with avoiding a potential incident, may be more difficult to measure and report on. This doesn’t take away from the benefits of risk management solutions in your business. Ultimately, the key to quantifying the value of ERM is to focus on what matters most to your organization and its stakeholders.
How implementing Resolver’s ERM software benefits your business
Resolver’s enterprise risk management software offers several benefits for organizations looking to streamline their risk management processes to build efficiency, resiliency, and agility. Our simple-to-use software eliminates the paper chase, allowing you to focus on establishing a risk culture that delivers actionable data and insights for better risk intelligence. With Resolver’s ERM platform and applications, organizations can connect their compliance, audit, and risk functions in a single platform, providing a single source of truth and bridging the gap between silos.
Our software enables organizations to easily manage their risk environment by identifying, assessing, treating, monitoring, and reviewing risks that might impact the achievement of organizational goals. Create real-time, easily exportable risk reports, heat maps, and board-ready dashboards with a filterable view of risks, assessment data, controls, locations, loss events, and more.
Ready to reap the benefits of enterprise risk management with Resolver’s ERM software? Register for an upcoming guided product showcase or book a custom demo to see how Resolver’s ERM solutions can help you streamline your risk management processes.