It’s amazing how much things can change…
I know it’s a cliché that often gets repeated, including by us, that the world is changing faster than it ever has.
The same can be said for enterprise risk management…or at least it should.
While the world and the needs of business have changed much in the last decade, ERM hasn’t quite caught up. This becomes apparent when we consider findings from surveys like NC State’s State of Risk Oversight Report that, year after year, show less than 1 in 5 companies realize a strategic benefit from their ERM program.
One likely source for this dismal result has to do with mindset, specifically around adhering to outdated processes like color coding risks (i.e. red/yellow/green), with the overarching purpose of reducing risk as much as possible or otherwise managing every risk down to green.
In a way, I get it. As people, we get set in our ways, and in some respects, this isn’t a bad thing.
But in business, taking the attitude of “this is how we’ve always done it” can be disastrous and can even put a company’s future in jeopardy.
Over time, it has become apparent that this outdated mindset towards ERM isn’t particularly valuable at helping executives better manage the company for success…
For someone who came into the ERM profession 10 or 15 years ago, this can be a difficult thing to grasp. Back then, effective ERM professionals needed to possess technical skills first and foremost.
But like so much in our world, that too has shifted.
As I convey in my ERM Advanced Techniques class for UCLA Extension’s ERM Certificate Program, technical skills are no longer the most important. Instead, ERM professionals must hone what are known as soft skills for the ERM function to be a value-add rather than just another cost of doing business.
What this means is that today’s successful ERM practitioners need to focus more on relationships, how they communicate, and how risk can be better integrated into day-to-day functions of the organization.
Realize that it’s not just about emails and risk reports, but also about such things as body language, tone, facial expression, and more broadly speaking, the relationships built with executives and business units.
These relationships and the proper harnessing of soft skills is critical to embedding a risk mindset into those nooks and crannies that seem insignificant but can have significant implications.
Below are a few articles on the blog that explore these concepts in-depth:
- Relationships: A Common but Fatal Mistake of Risk Management
- Expanding your Abilities with the Growth Mindset
- A Well-Organized Meeting vs. A Strategic Conversation: What’s the Difference?
- Storytelling and Risk Management – Developing Skills that Technology Cannot Replace
- Avoid the Gotcha Reputations with Executives by Using One Simple Step
- Prove your Value to the CEO: Focus More on Big Picture Issues, Less on Process
- What a Calm Act of Heroism Can Teach Us about Risk Management
The point of all of this is to hammer home the point that risk professionals need to always be adapting and evolving…that we should always be learning and be comfortable with getting out of our comfort zones.
ERM professionals should no longer see themselves as a technical-focused role, but instead as a strategic advisor that is there to help navigate the organization through uncertain waters.
Is it a challenge?
Most definitely…
However, it is a necessary part to flipping the perception that ERM is simply a documentation exercise with no real value for helping the company achieve its goals and build a strategic advantage.
My personal goal in the end is to flip the NC State survey result on its head so that less than 1 out of 5 companies indicate their ERM practices do NOT deliver strategic value to the organization.
How have you evolved or adapted both as a practitioner and your organization’s risk practices as a whole?
We’re interested in hearing about your experience in this journey, so please don’t hesitate to join the conversation on LinkedIn.
And if your company is struggling to shift away from old mindsets and could use a fresh perspective on what ERM should look like, reach out to me to discuss your specific situation, goals, and a roadmap for helping get you there.
