The risk management process includes the entire chain of risk work, from risk identification to implementation of control activities and taking direct measures. Here we go through how you can set the structure for an effective risk management process.
8 questions to map the organisation's risk work
A good start to setting the structure for the businesses risk management process is to make an evaluation of current work. Use the questions below as a basis for mapping how the organisation is performing.
- Do we have enough information about the risks in our critical processes to be able to develop a credible strategy and plan?
- Do we as an organisation have control over our risk exposure on an overall level; level of activity; and technical level – and how does these risks relate to each other?
- Do we know if we manage and reduce the risks linked to our strategic goals in an effective way?
- Can we, in a credible way, analyze and evaluate our risks linked to strategies, goals and operations?
- Do we have sufficient information to initiate the right actions and minimize losses associated with legal compliance?
- Do we continuously follow key risk indicators linked to risk in our IT systems, processes and information systems?
- Do we identify and monitor risk in daily work, for example in projects and ongoing work?
- Do we have a credible risk management process for risks at all levels of the business?
How should you set the structure for an effective risk management process?
Before starting to set the structure for the risk management process, you must have defined the scope, resources, stakeholders and legal requirements that needs to be followed.
Here are five steps that contribute to internal control becoming a value-creating activity and not an administrative burden. This will result in a more efficient risk management process as you can spend more time implementing it in the business.
1. Develop clear governing documents
The governing documents must be concrete and easy to understand. Therefore, think about breaking down complicated processes to a detailed level. Also set clear expectations in the governing documents so that there is a clear structure for roles, responsibilities and mandates.
2. Set a clear and realistic vision
Document how you want the internal control work to look within the next few years and set a target picture. Communicate in the organisation what the target image for the internal control work is so that everyone understands where the organisation is heading. Be clear in explaining how internal control will create added value in the organisation so that everyone understands why the need for change exists.
3. Evaluate existing working methods
Much of what you already do is actually part of the internal control work. So before you start looking at what you can do more of in the organisation, start by looking at how you work today and what is working. The internal control work must create value for the organisation and be in line with regulatory requirements and expectations. Good internal control work is not what looks good on paper, but what works and is used in practice.
4. Established ways of working do not change overnight
Change takes time and must be allowed to take time. It is therefore important to set realistic expectations and set a reasonable action plan with measures. Also think about not creating an administrative burden for the organisation by having to fill in lots of forms, but make sure you can focus on the right things.
5. Create a strong and ethical risk culture
Leaders should be role models in both word and deed. A poor attitude to risk and control by leaders can have serious negative consequences for the organisation in the form of unnecessary risk-taking, lack of risk management, but also high staff turnover. In order to get honest reporting, it is important that the culture of the organisation allows you to make mistakes sometimes. But that there is fundamentally a culture that is about careful behavior.
Streamline the risk management process in a digital environment
Documenting risks and measures can, as we mentioned earlier, be a heavy administrative workload for many businesses. In addition, if the administration is done manually and is personal, the risk work becomes vulnerable if that person leaves the organisation. Internal control that revolves around filling in a lot of forms does not directly create added value, instead more administration. By digitizing administrative work processes in a tool, you can save time, money and resources. You also get an overview and transparency via the tool, which makes the risk management process more efficient for the business because resources can be spent on the right things, to bring the work to life.
Stratsys' tools for Risk and Control provide organisations with effective support in internal control work and risk management. Do you want to know more about what a risk management system can do for your organisation? Read more about Stratsys' tools for risk and control.