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21° Nicosia,
20 October, 2019
 

The Importance of Risk Management in the Current Business Environment

By Savvas Rigas
Partner
K. Treppides & Co Ltd

As businesses continue to expand, managers will want to stay on top of risks and take advantage of all opportunities which in turn will allow organisations to grow and reach their goals by addressing those risks.

As business risks continue to increase, organizations are finding it necessary to implement some sort of a formal risk management system. An effective enterprise risk management (ERM) program can help organizations manage their risks and maximize opportunities. Organizations in all types of industries, public and private, have experienced a variety of benefits from enhancing their risk management programs.

A committee of five organizations dedicated to thought leadership around risk management provided a definition of ERM in 2004 (A definition of ERM was provided in 2004 by a five-organization committee dedicated to thought leadership around risk management). The Committee of Sponsoring Organizations (COSO) defined it as a process, effected by the entity’s board of directors, management, and other personnel, applied in strategy-setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within the risk appetite, to provide reasonable assurance regarding the achievement of objectives.

In simple terms, ERM is a way to effectively manage risk across the organization through the use of a common risk management framework. This framework can vary widely among organizations but typically involves people, rules, and tools. This means individuals with defined responsibilities use established, repeatable processes (i.e. rules), and the appropriate level of technology (i.e. tools) to mitigate risk.

Many organizations struggle with implementing ERM and identifying how, and at what level, to integrate it into their organization. Managers often say they are already aware of the risks for their respective areas of the business. In these circumstances, it is important to ascertain what value ERM provides, and how does it enable better perspectives and management of risks and risk data.

The benefits of an ERM system include the following:

View Risk as an Opportunity

Enterprise risk management (ERM) looks at risk holistically, considering how to treat and exploit risk. In other words, ERM helps with finding a way to use risk as an opportunity. This could involve increasing competitive positions or taking better advantage of the market. Because ERM helps an enterprise identify risks early managers are not blindsided by risk events. This means that potential future risks can be easily identified, providing a warning to the companies and improving the value of data analysis.

Make Better Decisions

The risk data received from enterprise risk management is vital to decision making at all management levels. Data includes the status of risk factors, possible new risks, and strategies to combat or work with risk. Aggregating and sharing this data helps enterprises understand the most important risks to focus on.

Amend the Risk Culture of an Organization

Once a manager begins to consider possible risks to the business, they will become more aware of possible future risks. This awareness changes the culture of an organization’s management, encouraging open discussion about how to mitigate risk and ultimately making the business more successful. Often, working with an enterprise risk management consulting firm enhances the process by creating a standardized framework for evaluating risk.

Introducing efficiency in the business processes

ERM advisory firms can assist in eliminating redundancy by creating a consistent way to evaluate risk, ensuring that an enterprise is spending the right amount of resources on risk management. Because many regulatory agencies are beginning to use data from ERM programs, using enterprise risk management can also help cut down on time and resources spent in audits and reviews. Cost management and awareness of risks are additional benefits that will make a business more efficient.

The benefits of enterprise risk management provide company leaders and other stakeholders with a structured intellectual framework to help plan for and cope with the changes of a constantly shifting business environment. Through all of the benefits noted above, ERM can enable better cost management and risk visibility that is related to the firms’ operational activities. It also enables better management of market, competitive, and economic conditions, and increases control and consolidation of disparate risk management functions.

K. Treppides & Co Ltd, the largest independent consulting firm, with established international presence and offices in London and Malta, offers a full range of legal, tax, accounting, consulting and financial advisory services to international Investors that are operating within a wide range of industry sectors. The company possesses many years of experience and a team of experienced members of staff who remain on hand to assist individuals and businesses throughout the entire investment process, in and through Cyprus.

Contact Details:
srigas@treppides.com
www.treppides.com

Nicosia: Treppides Tower, Kafkasou 9, Aglantzia, CY 2112, Nicosia, Cyprus
Limassol:Kristelina Tower, 12 Arch. Makarios III Avenue, Mesa Geitonia, CY 4000 Limassol, Cyprus
London: Office 3.1, 12 Hay Hill, Mayfair, London W1J 8NR
Malta: Level 1, Somnium, Tower Road, Swatar, Birkirkara BKR 4012
Tel:  +357 22678944, +357 25822722

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Cyprus  |  Treppides  |  Rigas  |  risk  |  management  |  business

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