Siloed risk management is a situation in which different departments or business units within an organization manage risks in isolation without collaborating or sharing information. In this approach, each department or business unit has its own risk management process, tools, and metrics, and there is no coordinated effort to identify and manage risks that could affect the organization as a whole.
Businesses generally operate with a multitude of diverse departments. Although siloed operations can be an effective practice for multiple reasons (notably, they let these different business units become specialists in their specific areas of expertise), risk silos can be detrimental to the success of your long-term risk management program.
3 reasons a siloed risk management approach stalls risk agility
A siloed risk management approach can create several problems for your organization, preventing or stalling a business from achieving risk agility, resiliency, and efficiency in three ways.
1. Siloed risk management offers a fragmented risk view
When different departments focus on specific risks or assess similar risks differently, it’s nearly impossible to understand the organization’s risk profile comprehensively. Silos can also make prioritizing risks and allocating resources harder because departments and leaders aren’t aligned.
2. Siloed risk management creates inefficiency
Siloed risk management can create duplication of effort and inefficiencies, as different departments may use varying tools, systems, taxonomies, or processes to manage risks. This can result in wasted resources and make it harder to track progress and measure the effectiveness of risk management efforts.
3. Siloed risk management limits visibility into risk across the organization
Finally, siloed risk management can create gaps in visibility, where risks that cut across different departments or business units may go unnoticed or unaddressed. This lack of transparency can leave the organization vulnerable to unexpected threats or disruptions and increase the likelihood of adverse outcomes.
To address these problems, organizations can adopt an integrated approach to risk management, where different departments and business units collaborate to identify and manage risks that holistically affect the entire organization. This approach requires strong leadership, effective communication, a culture of collaboration, and shared responsibility for managing risks. By fostering partnership and communication across departments and stakeholders, an integrated approach to risk management enables organizations to respond quickly and effectively to emerging risks and changing business conditions, thereby enhancing their risk agility.
How to smash silos in risk management for better results
A siloed business culture can be challenging to change, especially if it’s been that way for a while. Even in cases where risk managers understand that changes need to be made, they may face resistance from other executives, mainly if the company in question has been successful despite a siloed risk management approach or strategy.
The key in these situations is effectively showing how eliminating a departmental approach to risk management can improve the return on investment of risk management budgets. In today’s increasingly complex and interconnected risk landscape, there is no denying that siloed risk management can hinder growth. For example, suppose product design units launch a new product without considering the risks this action poses to manufacturing and customer service departments. In that case, the new item may end up costing more in customers and sales than it generates.
Risk managers must work with other business units to develop new ways of communicating risk across business units. This shared methodology and communication will help promote greater collaboration and enable firms to take a better strategic, company-wide approach to prevent threats and capitalize on opportunities.
How Resolver helps to break down silos in risk management
Today’s businesses need their risk management programs to deliver timely risk intelligence to allow them to make informed decisions that reliably drive business performance and deliver on corporate objectives. However, many risk management teams are stuck perpetually chasing and consolidating information. With endless piles of siloed data that they can’t use, these teams are stuck managing processes to “check the box” and cannot provide the strategic insights the organization needs.
Resolver’s enterprise risk management (ERM) software provides the foundation for the modernization of your entire program. Designed by industry experts based on the latest ERM best practices, Resolver enables your teams to connect their activities to business value and transform from “check-the-box” functions to trusted strategic advisors. With solutions that address enterprise risk management, compliance and ethics, internal audit, incident management, and internal controls over financial reporting (ICFR), Resolver has everything you need to turn risk data into business value.
Want to see how we break down risk silos?
See our product in action at an upcoming ERM software showcase, or request a demo to have a custom walk-through of Resolver’s risk intelligence platform for your team.
