October 19, 2010 1 Comment
Why do some companies loathe risk management? Well, many will say because it is a bureaucratic exercise devoted to minimizing risks at the expense of future growth and innovation – and in many cases they are right. This is due to the way risk management as a discipline has evolved as well as how risk management practitioners have been taught. For better or worse, risk management tends to lean towards insurance and compliance or, in other words, ways to minimize risk and increase paperwork.
So, when board directors and senior executives hear the words “risk management”, they immediately shift their focus to the more commonly held view and neglect the real value of the discipline. The real value of risk management comes from developing a keen understanding of the critical risks related to a company’s strategic objectives. With this understanding, companies can leap-frog the competition by addressing risks in an innovative and unique manner.
Wheelhouse Advisors has developed a tool set to help companies jump-start their new approach to understanding risks. Known as The ERM Compass™, the tool set is designed to identify opportunities to improve a company’s “risk mindfulness.” Risk mindfulness is a new way of viewing risks – a forward-looking and continuous approach that allows a company to use risk as a driver of intelligent growth and innovation. The level of a company’s risk mindfulness is measured using The ERM Compass™ Scorecard. The Scorecard focuses on four primary areas of risk as they relate to a company’s strategic objectives (see figure below). Scores are calculated for each risk area using five critical components of risk mindfulness. With the scores in hand, companies can easily determine the direction they need to take in order to increase their risk mindfulness and create value.
To learn more about The ERM Compass™ and to schedule a complimentary review, email us at NavigateSuccessfully@WheelhouseAdvisors.com.