Modified Enterprise Risk Management has been saved
Modified Enterprise Risk Management
Building resilience in a changing operating environment
The Covid-19 pandemic challenges leaders to stabilise amid crises and prepare for a newly uncertain future. The decisions businesses make in the near term will drive how the entity is sustained in the long term. Now is the time for leaders to take decisive action to soften the shocks yet to come, and at the same time prepare for what may change in the months ahead.
Respond – Responding to the challenges of Covid-19
Organisations have faced much disruption, providing challenges and exposure to new risks. Leaders have adapted to a workforce that are now predominately working from home, heightening exposure to cyber-attacks and operating in an unknown marketplace, all while juggling staff wellbeing, connectivity, and cash-flow.
Many Covid-19 related risks have materialised abruptly, with very little time to prepare. This has launched organisations into full-on crisis management, responding with risks that may not have been envisaged, and which have tested ERM capabilities to the fullest extent. The success, or otherwise, of those capabilities offers management a real-time war game and opportunity to enhance their risk response capabilities.
Recover – Moving from crisis management to ERM
A change of approach.
Over the past few weeks businesses have managed their organisation through the initial impact of the Covid-19 crisis, lessons have been learned as businesses and economies operate in the “new normal”. It is time to move out of crisis management to ERM.
Has Covid-19 changed our approach to ERM?
The simple answer is ‘no’ as your ERM governance structures should remain intact. However, to successfully transition beyond respond into the recovery phase, ERM governance structures should attune to focus on the risks that really matter to your objectives, such as, people, cash-flow, supply chain and access to markets. In fact those responsible for ERM should not apologise for being single minded in their determination to prioritise their risk response.
Up to now organisational focus has been on crisis management, managing short-term impacts to the organisation’s risk profile, and identifying how emerging risks will change the risk profile. It is now more important than ever to determine what are the actions or strategies needed to mitigate these newly emerging risks and strengthen resilience. ERM is the tool to drive scenario planning, strengthen resilience, and respond to board and stakeholder concerns.
Recover – Emerging risks
Our new “normal”
As we begin to transition from respond to recover, and into new ways of living and working, many of the uncertainties and risks we feared have materialised, and crisis management plans have been enacted. The economic impact of Covid-19 is at the forefront of the global agenda, with many emerging risks now becoming permanent concerns. The unknown has become a more permanent state. Without a clear end-date, travel patterns, consumer and business confidence will stagnate. Businesses should now use ERM to focus on “how to work” and recover in the “new norm” we are living in.
Thrive – Robust ERM
Facing the future
In time, the Covid-19 crisis will pass. How organisations respond today, using informed ERM mechanisms and scenario planning, can make a significant impact on continued viability, and can position you favourably for economic upturn.
Management should start to think about focusing on a return to market posture in preparation of moving to the thrive stage. This will require effective management of the transition back to a restored future. Using ERM, management will need to juggle many risks, such as; permanence of changed customer behaviours, operating for cash or profit, accelerated digital transformation, changes to the social contract with employees, and changes in social and institutional expectations.
Having a well-developed capability to respond to opportunities, and manage related risks effectively, will build organisational resilience for the future, allowing you to thrive.
ERM will be a key pillar in that capability and the time is now to use ERM, to its fullest extent, to build resilience.