EY - Expecting more from risk management

Expecting more from risk management

Drive business results by harnessing uncertainty

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In an increasingly competitive, fast-paced world, organizations need to continually advance their risk management practices, building on the strong foundation of protection and compliance into an expanded focus on risk factors that impact strategic decision-making and operational performance.

Many organizations continue to operate using risk management programs that have not evolved and may not protect them from today’s risks. For many global organizations, risk management is still seen as only a high-level compliance exercise to educate the board and audit committee. As a result, there are often no clear lines of sight from the boardroom to the operations themselves.

Risk management approaches need to change to better reflect the dynamics of today’s rapidly evolving global marketplace. What carried companies through in the past is not good enough anymore.

We believe a paradigm shift in risk management is beginning, which is:

  • Tied to the increasingly complex world in which companies now operate
  • Based on the awareness that uncertainty is embedded in (and impacts) everything we do
  • Focused on both capturing upside opportunities as well as protecting the business

Organizations are moving toward an insight-driven and performance-oriented approach to risk management that becomes intrinsic to the business and is embedded in key business processes. We call that risk-enabled performance management (REPM).

REPM is about creating tangible value.

EY chart – REPM: the connection between business performance and value creation

REPM can drive more robust analysis of investment decisions, helping improve returns on capital investments, as well as identifying opportunities to reduce uncertainty and improve project economics. By shifting the focus to risk-enabled performance management, organizations can concentrate on uncertainty holistically, rather than just identifying and measuring risks individually.

This is the future of risk management – a better pathway to improved business performance and competitiveness in a changing business world.

Key questions

  • Does your company view risk management as a key component in managing business performance?
  • Is there continuity of understanding in the risks associated with your plans and objectives, which carries through from strategic planning to capital allocation and operational execution?
  • In addition to protecting your business, is your risk management providing direct benefit to your growth efforts as well?
  • Is risk management integrated into the “rhythm” of your business processes, versus a later lens or add-on?
  • Do you know what your risk appetite really is, and more importantly, how it can be used to inform management decision-making?
  • Are you using quantitative analytics as effectively as you could be to manage risks to the business?
  • Do you have a good sense of where and how uncertainty is embedded in your plans and activities?
  • Does leadership have a clear view of the company’s risk profile across the breadth of its operations?
  • Is your risk management connected to your P&L, cash flow and other critical metrics?

If you have answered one of these questions with “no,” it is time for you to take action. Contact us today.

REPM — the connection between business performance and value creation

EY chart – REPM: the connection between business performance and value creation×