Modern businesses face a wide range of risks, from security threats to regulatory changes. If not properly managed, these risks can have drastic impacts on day-to-day activities and business continuity.
Unfortunately, relying on traditional risk management plans, which focus on specific, siloed risks without looking at how they impact an entire organization, no longer works. Modern business owners need to adopt a holistic program that doesn't just examine how a specific risk affects a single department or business unit.
Enter enterprise risk management (ERM).
This approach can be the difference between successful and unsuccessful risk mitigation strategies, as it's organization-wide.
In this article, we take an in-depth look at ERM to help you improve your risk responses.
Enterprise risk management is a structured, holistic process that helps companies evaluate, manage, and monitor risks that can impact their ability to achieve business objectives. It encompasses all types of risks that can affect a business, including financial, strategic, operational, and compliance risks. Think of it this way — it's a blueprint to help you manage organization-wide risks.
As mentioned, ERM is a structured process that follows specific steps. Here's a breakdown of its stages:
Traditional risk management focuses on individual risks and leaves decision-making to business unit leaders. Unfortunately, this often results in siloed assessments that can limit the mitigation strategy’s effectiveness.
Take a supply chain risk like product shortages, for example. With traditional risk management, it's up to the supply chain department to assess, monitor, and respond to this risk. The department's head may focus entirely on how the risk impacts their business unit without considering how it affects departments like marketing and customer support, as each is considered independent. Such blind spots can result in ineffective mitigation strategies.
Modern risk management takes a more holistic approach to risk assessment and mitigation. Rather than evaluate and monitor risks in isolation, it considers how different risks interact and how they can impact company-wide performance.
Instead of making risk management the day-to-day responsibility of department leaders, it calls for a dedicated manager who oversees all risk management efforts. This reduces the risk of siloed response strategies.
Risk management demands a lot of time and resources. After all, it requires you to assess your internal and external environment and determine how each risk affects your entire enterprise.
So, it's normal to question whether the process is worth all the trouble. If you are, rest assured that it is. Here's why:
Businesses must adhere to several regulations to remain compliant. They may need to comply with SOC 2 standards (which means your tech stack needs to maintain SOC 2 compliance) or HIPAA regulations (if the business is in the healthcare sector).
While these regulations are in place to protect businesses and customers, they can result in fines or other penalties when not followed carefully. This can lead to significant business disruptions that impact finances and day-to-day operations.
ERM prevents this with a systematic approach to identifying and managing regulatory risks. It can help with something like SOC 2 compliance by enabling you to identify potential issues with your IT infrastructure and guiding you on how to create processes for managing risks before they impact your business.
If, for example, you find that your virtual mailbox provider doesn't adhere to SOC 2 standards, you can avoid the risk by finding a new service provider or mitigate it by asking your current provider to implement new security protocols.
Security threats can be devastating for enterprises. For instance, when business addresses change or mail isn't handled properly, personal identifying information and sensitive business correspondence can fall into the wrong hands, resulting in reputational damage or potential lawsuits.
Businesses may also experience operational delays and face financial and legal repercussions. This is more so the case if the mishandled mail is from government bodies like the Internal Revenue Service (IRS) or courts.
It's important to ensure that mail gets where it needs to go and is handled properly when it's no longer needed. ERM can reveal potential security issues in advance and help you implement effective management strategies.
To prevent tax mail mishandling and consequent IRS repercussions, you can use a virtual mailbox for tax compliance — your provider can digitize your mail and send it to you virtually, allowing you to respond quickly.
Further, you can use a virtual address to alleviate privacy concerns. Reputable virtual address services, like Stable, provide secure mail handling, encrypted communications, and shredding services to help maintain confidentiality.
Businesses face numerous strategic and operational risks, including increased market competition, supply chain issues, and natural disasters. If not adequately planned for, these risks can impact business operations, performance, and, ultimately, their bottom line.
ERM helps business owners mitigate such risks or at least prepare quick responses by revealing vulnerabilities before they occur. It also ensures there are management plans in place to minimize their impact.
Say you identify product shortages as a likely supply chain risk. You can implement measures like real-time product monitoring to facilitate quicker response times, agile planning to ensure you have sufficient safety stock, and supply diversification to make sure you have backup partners if your primary supplier has issues.
There are multiple ERM frameworks, each developed for unique industries, goals, available resources, and organizational structures. Here, we explore the most common ones to help you start your risk management journey:
The COSO (Committee of Sponsoring Organizations) Integrated Framework addresses the value of ERM in enterprise planning and helps risk managers incorporate internal controls into business processes. It includes the following five risk management components:
The COSO Integrated Framework stands out because it seeks to integrate ERM into strategic decision-making and incorporate internal controls into business processes. It's popular with organizations with extensive ethical and legal requirements, including financial institutions and publicly traded companies.
The Casualty Actuarial Society (CAS) Framework is built from an actuarial perspective, making it suitable for enterprises that offer financial services. It focuses on four types of risks — hazard risks like liability suits, operational risks like business reporting risks, financial risks like inflation, and strategic risks like reputational damage — and provides a seven-step sequential process to assess and manage them. These steps are:
Unlike other ERM frameworks, the International Organization for Standardization (ISO) 31000 Framework isn't specific to any industry; it looks at risk broadly, making it suitable for a wide range of businesses.
This framework seeks to help businesses achieve their objectives, effectively identify threats and opportunities, and ensure proper resource allocation to business risks. Some of its core principles include:
The COBIT Framework, created by the Information Systems Audit and Control Association (ISACA), is an IT-focused program. It primarily offers management and governance guidance to enterprises in the digital environment, helping them create and implement effective action plans.
The ERM program's management process works to ensure that organizations balance the costs and benefits of managing their IT risks and that they integrate IT risk management processes with overall ERM. Its governance process aims to make sure:
While existing ERM frameworks have proven valuable for many businesses, they may not meet your needs. This is especially true if you're in a niche market with complex or underdeveloped regulations like crypto.
Creating a custom framework allows you to tailor your approach to specific business risks and needs, which can increase its chances of success. It also allows you to address gaps in existing frameworks, which, again, can elevate risk management plans.
Here's a step-by-step on how to create and implement custom frameworks:
Your mail can be risk-prone — improper handling, poor security, and late delivery can result in financial and legal penalties that impact your bottom line and business operations. Therefore, mail management is a crucial risk-prevention tactic.
A virtual mail service like Stable may be the solution you need. We help enterprises improve mail management by receiving mail on their behalf, scanning it so it can reach them on time, and shredding physical copies to help maintain privacy.
Further, with Stable, you never have to worry about mail-related security threats. We've invested significantly in mail safety, ensuring that your mail reaches you securely — our SOC 2-compliant platform minimizes security risks.
Get started with Stable today to elevate mail management and minimize enterprise risks!
Modern businesses face a wide range of risks, from security threats to regulatory changes. If not properly managed, these risks can have drastic impacts on day-to-day activities and business continuity.
Unfortunately, relying on traditional risk management plans, which focus on specific, siloed risks without looking at how they impact an entire organization, no longer works. Modern business owners need to adopt a holistic program that doesn't just examine how a specific risk affects a single department or business unit.
Enter enterprise risk management (ERM).
This approach can be the difference between successful and unsuccessful risk mitigation strategies, as it's organization-wide.
In this article, we take an in-depth look at ERM to help you improve your risk responses.
Enterprise risk management is a structured, holistic process that helps companies evaluate, manage, and monitor risks that can impact their ability to achieve business objectives. It encompasses all types of risks that can affect a business, including financial, strategic, operational, and compliance risks. Think of it this way — it's a blueprint to help you manage organization-wide risks.
As mentioned, ERM is a structured process that follows specific steps. Here's a breakdown of its stages:
Traditional risk management focuses on individual risks and leaves decision-making to business unit leaders. Unfortunately, this often results in siloed assessments that can limit the mitigation strategy’s effectiveness.
Take a supply chain risk like product shortages, for example. With traditional risk management, it's up to the supply chain department to assess, monitor, and respond to this risk. The department's head may focus entirely on how the risk impacts their business unit without considering how it affects departments like marketing and customer support, as each is considered independent. Such blind spots can result in ineffective mitigation strategies.
Modern risk management takes a more holistic approach to risk assessment and mitigation. Rather than evaluate and monitor risks in isolation, it considers how different risks interact and how they can impact company-wide performance.
Instead of making risk management the day-to-day responsibility of department leaders, it calls for a dedicated manager who oversees all risk management efforts. This reduces the risk of siloed response strategies.
Risk management demands a lot of time and resources. After all, it requires you to assess your internal and external environment and determine how each risk affects your entire enterprise.
So, it's normal to question whether the process is worth all the trouble. If you are, rest assured that it is. Here's why:
Businesses must adhere to several regulations to remain compliant. They may need to comply with SOC 2 standards (which means your tech stack needs to maintain SOC 2 compliance) or HIPAA regulations (if the business is in the healthcare sector).
While these regulations are in place to protect businesses and customers, they can result in fines or other penalties when not followed carefully. This can lead to significant business disruptions that impact finances and day-to-day operations.
ERM prevents this with a systematic approach to identifying and managing regulatory risks. It can help with something like SOC 2 compliance by enabling you to identify potential issues with your IT infrastructure and guiding you on how to create processes for managing risks before they impact your business.
If, for example, you find that your virtual mailbox provider doesn't adhere to SOC 2 standards, you can avoid the risk by finding a new service provider or mitigate it by asking your current provider to implement new security protocols.
Security threats can be devastating for enterprises. For instance, when business addresses change or mail isn't handled properly, personal identifying information and sensitive business correspondence can fall into the wrong hands, resulting in reputational damage or potential lawsuits.
Businesses may also experience operational delays and face financial and legal repercussions. This is more so the case if the mishandled mail is from government bodies like the Internal Revenue Service (IRS) or courts.
It's important to ensure that mail gets where it needs to go and is handled properly when it's no longer needed. ERM can reveal potential security issues in advance and help you implement effective management strategies.
To prevent tax mail mishandling and consequent IRS repercussions, you can use a virtual mailbox for tax compliance — your provider can digitize your mail and send it to you virtually, allowing you to respond quickly.
Further, you can use a virtual address to alleviate privacy concerns. Reputable virtual address services, like Stable, provide secure mail handling, encrypted communications, and shredding services to help maintain confidentiality.
Businesses face numerous strategic and operational risks, including increased market competition, supply chain issues, and natural disasters. If not adequately planned for, these risks can impact business operations, performance, and, ultimately, their bottom line.
ERM helps business owners mitigate such risks or at least prepare quick responses by revealing vulnerabilities before they occur. It also ensures there are management plans in place to minimize their impact.
Say you identify product shortages as a likely supply chain risk. You can implement measures like real-time product monitoring to facilitate quicker response times, agile planning to ensure you have sufficient safety stock, and supply diversification to make sure you have backup partners if your primary supplier has issues.
There are multiple ERM frameworks, each developed for unique industries, goals, available resources, and organizational structures. Here, we explore the most common ones to help you start your risk management journey:
The COSO (Committee of Sponsoring Organizations) Integrated Framework addresses the value of ERM in enterprise planning and helps risk managers incorporate internal controls into business processes. It includes the following five risk management components:
The COSO Integrated Framework stands out because it seeks to integrate ERM into strategic decision-making and incorporate internal controls into business processes. It's popular with organizations with extensive ethical and legal requirements, including financial institutions and publicly traded companies.
The Casualty Actuarial Society (CAS) Framework is built from an actuarial perspective, making it suitable for enterprises that offer financial services. It focuses on four types of risks — hazard risks like liability suits, operational risks like business reporting risks, financial risks like inflation, and strategic risks like reputational damage — and provides a seven-step sequential process to assess and manage them. These steps are:
Unlike other ERM frameworks, the International Organization for Standardization (ISO) 31000 Framework isn't specific to any industry; it looks at risk broadly, making it suitable for a wide range of businesses.
This framework seeks to help businesses achieve their objectives, effectively identify threats and opportunities, and ensure proper resource allocation to business risks. Some of its core principles include:
The COBIT Framework, created by the Information Systems Audit and Control Association (ISACA), is an IT-focused program. It primarily offers management and governance guidance to enterprises in the digital environment, helping them create and implement effective action plans.
The ERM program's management process works to ensure that organizations balance the costs and benefits of managing their IT risks and that they integrate IT risk management processes with overall ERM. Its governance process aims to make sure:
While existing ERM frameworks have proven valuable for many businesses, they may not meet your needs. This is especially true if you're in a niche market with complex or underdeveloped regulations like crypto.
Creating a custom framework allows you to tailor your approach to specific business risks and needs, which can increase its chances of success. It also allows you to address gaps in existing frameworks, which, again, can elevate risk management plans.
Here's a step-by-step on how to create and implement custom frameworks:
Your mail can be risk-prone — improper handling, poor security, and late delivery can result in financial and legal penalties that impact your bottom line and business operations. Therefore, mail management is a crucial risk-prevention tactic.
A virtual mail service like Stable may be the solution you need. We help enterprises improve mail management by receiving mail on their behalf, scanning it so it can reach them on time, and shredding physical copies to help maintain privacy.
Further, with Stable, you never have to worry about mail-related security threats. We've invested significantly in mail safety, ensuring that your mail reaches you securely — our SOC 2-compliant platform minimizes security risks.
Get started with Stable today to elevate mail management and minimize enterprise risks!
