Value Generation through Enterprise Risk Management

By Swaminathan, Prasanna, May 8, 2015

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The global business community operates in an increasingly complex, competitive, volatile markets; faced with renewed challenges and threatened by a variety of factors such as complex supply chains, growing cyber threats, increasing business disruptions, etc. In such a scenario, many organizations have embraced Enterprise Risk Management (ERM) and have benefited from it.

 

ERM is the process of planning, organizing, leading, and controlling the activities of an organization in order to minimize the effects of risk on an organization’s objectives. In this regard, to know how organizations have embraced ERM and derived competitive advantage, I would like to elaborate and explain the following topics in the future blogs:

 

Integration of Risk Management into Strategy

Imagine an energy company that is planning to invest in a new power generation plant. By adopting ERM, it can have a look at risk adjusted returns and alternatives before deciding on such huge capital spending projects. Organizations that have embedded ERM in their strategic planning process have an increased likelihood of meeting their strategic goals and obejctives.

 

‘Risk Adjusted’ View of Performance Management

Consider a bank that is performing the appraisal of one of its traders belonging to the trading desk. The performance assessment must not only look at the returns he has earned for them but also the risks he has taken to earn those returns. Organizations that strive to derive value must try to maximize risk-adjusted profitability by trying to include risk-adjusted performance metrics.

 

Managing Emerging Risks

Organizations need to continuously monitor and assess their ERM program to manage and respond to a variety of emerging risks such as repuatational risks, vendor risks, information security risks, conduct risk etc. Many organizations leverage social media platforms to gather insights regarding the customer sentiments and incorporate them as a part of their risk assessment process.

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Swaminathan, Prasanna

Swami has over a decade of experience in risk management across enterprise risk, energy, commodity trading risk, and trade finance services. He is particularly experienced in energy products such as Oil & Gas, Power as well as Bullion. He has spearheaded a project to develop a comprehensive ERM program for a Fortune 100 company. He also handled the entire gamut of tasks encompassing Middle Office Operations, Product Control, Market Risk, Credit Risk etc. He is a certified Green Belt and Lean Six Sigma professional.                                                                                                                                                                              Prasanna leads the Risk & Compliance management practice at BCT. He is a thought leader in Risk Management and has published insights on key risk and compliance topics and is also a key author for three high-performance research programs in risk management. He has delivered client engagements for several institutions across Africa (South Africa), Asia Pacific (Australia, India, Japan, Singapore), Continental Europe (France, Germany), United Kingdom and United States to transform their businesses and risk capabilities. 

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