Risk management has become complex and critical in the current environment. Departments without sophisticated risk management and qualified organizations may face several disaster scenarios. Globalization, technology, economic environment, regulators, competitors, and speed of change, all contributed to making business operations more complex. Risk management departments to gear up and develop annual strategies taking into account these aspects in mind.
Five tips for preparing an annual global strategy are listed below:
1. Break Silo Approach
Depending on the size of the organization, the organization may have a number of departments focusing on risk management. For some names, as the department heads referred to in the first paragraph, we have internal audit, fraud prevention and investigation, Compliance, Information Security and business ethics. These departments have, in general, some functions that overlap and turf wars. Silos are formed and senior management is struggling to make sense of different risk dashboards and reports presented by heads of departments.
Prepare individual plans for services and roll them up to have a combined of all risk management departments. Prepare a single strategy and a plan for the organization as a whole to provide the same leadership. Submit a management plan that focus on the top risks to the organization, with a plan to mitigate and control them. Management will have greater respect and
provide greater support to mainstreaming. Various risk management departments will be also able to save time and cost of monitoring the various risks change by reducing duplication of work, benefiting from synergies and sharing tools and information.
2. Determining risk Philosophy and Organization Appetite
In some cases, departments risk management dashboard presents a risk to the organization's senior management. If the executive director of the organization asks, "Can we hold on this Are you sure that if the top 10 risks are reduced, the organization will sail through the years?" Head of department in general, can not a say a definitive "yes". The answer is given with a can, but if so but not a "yes". So the question is how a head of department should resolve this issue.
Risk managers need to determine the risk philosophy and appetite of the organization. To assess the risk of Philosophy, understand organizational culture and environment. Business operations are run as daily and strategy of the organization are good indicators of risk to find philosophy. Assess whether the business has aggressive or conservative attitude to risk to achieve business objectives.
The risk appetite is the amount of risk the organization is willing to take to conduct business. A simple question to ask board members would be - "How much is going to make you uncomfortable when it appears in the newspaper business?" Consolidation of exposures to various risks identified by risk departments and submit them to council. Finally, to assess whether the company's internal Outlook on risk philosophy and appetite are consistent with the views of the Board and other stakeholders. Realign two if necessary to prepare the annual strategy.
3. Understand and integrate with business strategy
In some companies, business strategies and annual plans and risk management are developed in parallel, with no information given as to the other is planning. Risk management strategy can not be internally focused department. Risk department heads must obtain information on the organization's business strategy to understand the strategic risks.
For example, to obtain information on new products and services that the organization is introducing next year. Identify territories, branches, and the countries where the organization intends to expand its business operations. Determine what will be the risks of expansion and innovation. Let's say, the United States of America is a company planning to introduce its products in India. Now, India has different laws, regulations and taxes. Also, operational risks are different. Understanding these risks and to integrate the strategy and annual plan. Thus, any risk management departments or business operation departments will be surprised. Budgets and plans will be included and approved before the start of the year, so there will be limited by fire.
4. Focus on building relationships
One of the grouses that risk departments have is that they are not via CXO's, not reporting directly to the top or representation on board and are marginalized from critical business operations due to negative perceptions.
Plan for next year and to prepare a wish list. Include the time she and other CXO's CEO, member of the training and supervision of risks, a new organization structure, reporting directly to head CEO and board nomination. Discuss these issues with the CEO and senior management during the preparation of the plan. This will ensure that senior management program requirements in their plans. Insist that the CEO puts risk management as one of the points of his / her personal score card balance. This will make sure that he / she is dedicated and committed to risk management throughout the year.
Discuss the composition of the risk oversight and audit committee. Identify that you want to nominate members to support risk management initiatives. Define the process of reporting to board and audit committee. Their commitment to appoint board members and new organizational structure of risk management departments. Turn on the land for building relationships in the planning stage itself.
5. Evaluation of competitive strategies
Risk departments are generally satisfied with what they do and to find information on tools and methodologies from various institutes of periodicals, journals and conferences. In some cases, there is some focus on operations risk management departments competing companies and organizations.
Determine which business organizations are in competition regarding products and services in different territories. Focus on finding information operations risk management department of these organizations. Learn the risks facing the organization, how they were mitigated, what kind of tools and knowledge base that they use, what are the power of staff and set of skills and organizational structure. Will some of the practices leading to cost savings and greater synergy in the business? Determine similarities and differences, and assess what can be incorporated into your organization effectively. There are several lessons can be learned from successes and failures competitors. Knowledge leverage competition to learn these lessons.
Above are the five points that can be easily incorporated to prepare a comprehensive strategy annually. There are some other things risk management departments can look. Some of them are entering ERM, brand building risk management department, the application of collective intelligence, etc.
A single line of advice would be to look at the big picture and question the status quo. Put on hats of thinking and to prepare a new strategy. We wish you all the best for preparing annual strategy.
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