Risk is made up of two parts: the probability of something going wrong, and the negative consequences if it does. Organizations operate in a dynamic environment, so the future remains uncertain.
The following are reasons why an organization is in urgent need of appropriate risk management:
Adverse Consequences:
Risk can be hard to spot. However, if let alone to prepare for and manage and you're hit by a consequence that you hadn't planned for, then the costs, time, and reputations could be on the line.
Inconsistent and Unreliable Risk Data Information
People call different things by the same name and the same things by different names. Without an automated and repeatable process to gather data, all your time resources are focused on collection rather than execution.
Act on Emerging Risks and Opportunities
Risk management must be rooted in the future, not the past. What happened yesterday is only important if it helps predict the future. Tomorrow's risks and opportunities, if predicted early, provide a business advantage. The role of the risk manager in foreseeing the catastrophic events and business opportunities is critical.
Create Continuous Insight
Top management, who base decisions on risk information, require insight into the risk appetite on a real-time basis. Just reporting annually provides a rear-view focus and limited insight on how to improve the business. The ability to manage risk at the various levels by the risk appetite drives better performance.
Risk managers are typically responsible for ensuring that a consistent risk management process is followed throughout the organization. However, the risks are "owned" by the lines of business. As a result, risk managers constantly struggle with tracking the progress of responding to risks.
The Lines of business typically do not think about risks as you do from a compliance perspective, but about meeting their performance objectives. They tend to receive several surveys or assessment requests from different groups that ask similar questions (that is, risk management, audit, IT security, business continuity, and so on).
Typically, the business units come up with good solutions to address the risks they know about, but only those risks. They have absolutely no visibility into risks outside of their silo that could negatively affect them. Risk mitigation efforts that are successful are often one-offs, and are typically never reapplied to other regions or similar business units.
Executives and directors are concerned with market expectations and delivering the strategy. Risks are often not addressed during management meetings. As a result, executives do not know if any negative surprises keep them from meeting their projections until it is too late.
The consequence of this fragmented and disjointed approach to risk management is that risks go unnoticed, resulting in losses.
How SAP Risk Management helps an Organization
SAP Risk Management automates manual tasks, employs best practices in a unified platform, automates the monitoring using SAP HANA-based key risk indicators (KRIs), embedded reporting, and analytics on real-time information. SAP Risk Management is an end-to-end solution for the planning, identification, analysis, response and monitoring risks, and their incidents that specifically address these requirements.
In the next lesson, we explore into the key capabilities of SAP Risk Management in more detail.
