The Quarterly Journal of the EDS Agility Alliance’s article titled, Unwelcome Surprises, and authored by Al Decker, discusses the dangers that can evolve from having a decentralized business structure that does not promptly alert upper management of potential dangers.  Not knowing the outcome of future events makes the management of risks seem impossible.  However, the use of risk management tools can provide the knowledge needed to empower management to seemingly do the impossible.  Risk management tools can help greatly minimize the potential negative effects of some business risks.

When enterprise risk management (ERM) is utilized effectively, information is shared across all levels to avoid most surprises.  The greater awareness, in turn, creates confidence for corporate executives and stakeholders.

Management should be prepared to develop the following procedures as part of their ERM processes:

  • develop risk context that sets the stage for balance between costs and benefits of risk management,
  • provide continual risk identification,
  • understand risk fully for successful management,
  • set priorities and establish treatment of risks,
  • provide different options for treatment of risks based on cost and benefits,
  • establish effective communication regarding risks, and
  • provide numerous reviews and monitor risks at all times.

Many times the initial step for a practical ERM program is for upper management to acknowledge that steps should be taken to address potential dangers.  In addition, businesses should accept the cost and time needed to implement ERM.  The ultimate benefits of a successful ERM program include the following items:

  • cross-functional flow of information,
  • contact person(s) to provide assistance and direction for management of risks,
  • risk planning to include different scenarios of risks that are possible,
  • communication improvements to inform stakeholders of mitigation efforts, and
  • focus on compliance and factors such as quality and increased value for the business.

Article Source: “Unwelcome Surprises,” by Al Decker, The Quarterly Journal of the EDS Agility Alliance, Vol. 1, Issue 3, pp. 11-15, 2006.

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ERM Enterprise Risk Management Initiative 2006-09-25