Why now is the time to modernize your risk management strategy

Businesses need a reliable way to manage risk. Data intelligence can align functions, enable resilience and drive better outcomes.

In brief

• A majority of boards in the 2021 EY Global Board Risk Survey lack confidence in their company’s ability to manage risk.
• Data helps tell the story of what’s happening within a business and its industry, allowing for more robust risk management dialogue.

Attempting to combat pervasive risk using the old “divide and conquer” approach is not effective in the connected digital era. Threats are becoming more sophisticated, evolving and expanding at an unprecedented pace. Without a proactive and coordinated approach to risk management, organizations find that efforts are often duplicated, processes are inefficient and costs of compliance are unnecessarily high. Further, historically siloed and misaligned risk management functions have made it nearly impossible to provide boards and executives with a holistic view of how risks may impact the enterprise and its ability to achieve strategic objectives.

The 2021 EY Global Board Risk Survey shows that fewer than 20% of boards believe their organization is highly effective at handling risk. Four out of five boards believe improved risk management will be critical for their business to protect and build value in the next five years.

How integrated risk management can protect more with less

With ever-increasing pressure to do more with less, companies are having to find new ways to accelerate the modernization and digitalization of their risk management processes. The good news is that the speed and scale of today’s digital products and processes make it possible for integrated risk management programs to access data, which enables more informed decision-making.

Keeping your organization’s data at the center of your risk management strategy is a pivotal shift in how companies have previously approached risk management. Now, with better access to data, an organization can align its risk taxonomy and implement dynamic risk assessment methods that adapt to the changing business environment, while coordinating risk response and reporting across all three lines of defense.

At leading organizations, the three lines of defense are already transforming their risk operating model to reduce costs, increase risk coverage and better respond to market forces. By implementing the a connected risk approach, these companies have been able to capitalize on upside risk while minimizing the threat of downside and outside risks. By keeping data at the center, this flexible operating model coupled with data intelligence and a unified technology platform allows an organization to effectively identify risk and determine the appropriate response based on exposure and management preparedness.

The ideal approach:

• Aligns governance, risk and compliance (GRC) priorities with enterprise strategic goals
• Unifies data on a common platform with automated continuous refresh capability
• Creates value from analytics and dashboards for better risk management planning

Five benefits of integrated risk management:

Effective integrated risk management provides the platform to validate and codify decisions on emerging risks and strategic big bets, enabling organizations to strengthen resilience, create sustainable value and achieve performance objectives. The top five benefits include:
 

1. Cost reduction: elimination of waste through process simplification, automation and resource realignment
2. Risk coverage: prioritized and scaled risk and compliance coverage across the organization, in line with risk appetite
3. Risk capitalization: a performance-oriented approach embedded in key processes promotes value creation and improves business outcomes
4. Risk reporting: consistent and meaningful risk reporting and insights available throughout the organization promote better and faster decision-making
5. Risk culture: broad awareness identifies emerging risks to drive real-time response and monitoring

A special thanks to Megan Duggan and A.J. Spalding for contributing to this article.