The inescapable reality is that every single day businesses incur losses and experience operational disruptions due to failures by employees, incorrect implementation of processes and technologies as well as wilful disobedience to internal controls. These losses may be manifest in the form of uncollectible receivables from disappointed clients, lost sales due to call centre failures or unproductive employee downtime when computer systems are unavailable, or a host of other potential problems.
Managing Risks is an essential part of an organisations well being. Without good risk management strategies, they are left open to attack from internal and external sources that can cause real damage. Without assessing and managing risks on a regular basis a company might find they pay the price with their reputation and their bottom line. While most businesses have developed ad hoc methods of dealing with such losses in the past, legislation (such as SOX and the Basel Accord) has made standardized compliance procedures much more complex.
The good news is that risk management no longer needs to be a difficult task. Latest developments in risk management software make it easier for a firm to identity and deal effectively with arising problems before they become significant issues. Good risk software provides a structured end-to-end risk management framework for managing an extensive range of strategic and operational risks in a consistent and cost-effective manner.
Things to consider when searching for an Operational Risk Management Software
The primary consideration when considering any operational risk management software package is to ensure that it will easily collect all of your risks, and group them into one easy-to-view format, which can give you a quick snapshot of your current risk level. No matter your business, this is the primary function of any operational risk management software. By doing this you will get a good handle on your risks, and be able to manage risk with much more efficiency, which will free up more resources to increase your bottom line
Another function of good operational risk management software would be to standardize all the data you’ve collected so that different risks from different parts of your business can be compared apples to apples. This makes it much easier for you to compare different areas of your business, and by using operational risk management software, you’ll be sure to be able to make some detached, objective decisions regarding the risk management of your business.
Above all, any operational risk management software you decide to use should have an easy enough interface to make entering actual pieces of data straightforward and simple. It’s no use to losing any efficiency you may gain by minimizing your risk to the use of a program. Any operational risk management software you use should obviously be a net plus to your business. It should be set up to generate reports that can be fairly easy to understand. When personnel is involved, it’s important to propagate information in a fashion that’s easy to understand. Another feature that has been known to dramatically increase profits and competitiveness is to have some kind of a benchmark function. While this data is generally proprietary, you can set benchmarks as performance targets, which can greatly enhance productivity.
When you use appropriate operational risk management software for your business, you will virtually guarantee increased performance, enhanced profits, and a dramatic decrease in the probability of any negative incidents occurring that can bring loss to your company.
When looking for risk management software, the following key elements should be considered:
-good automation of the key elements of the risk and mitigation cycle
-a shared central repository of information
-the linking of risks to strategic objectives with both ‘top down’ and ‘bottom up’ views of information
-the facility to establish links between risks, controls and people
-easy to implement and understand
-tools for developing new risk management strategies
-a centralised and consistent view of both organisation and individual responsibilities
-a wide selection of templates to simplify each stage of the risk management process
-rapid implementation so you can be up and running straight away
Good risk management software should enable a user to do the following:
1. Identify Risks
Probably the most crucial part of all risk management software is its ability to assist in the identification and allocation of risks. Software should have the following functionality that enables you to:
record individual risks
classify each risk by types (e.g. financial, legal, compliance etc.)
import related documents and associate them with the relevant risks
2. Assess Risks
Having identified risks the software now needs to aid you in their assessment. Look for software that:
helps assess and quantify the impact and likelihood of the risk
is an intuitive system for calculating inherent risk
provides different views of each risk
3. Mitigate Risks
Once each risk has been assessed the next stage is to identify ways in which to mitigate that risk. Risk management software needs to help you:
-automate calculation and communication of residual risk
-create and communicate mitigation and contingency plans to all involved
-provide templates for entry and editing of controls
4. Monitor and Report
An important part of the risk management cycle is monitoring. Keeping an eye on the progress of risk management measures and their outcome is crucial to ensure they are effectively dealt with and not at risk of reoccurring. Reporting on this progress to management board and relevant departments and individuals is another necessary part of the risk management process. Risk management software can help with this, look for the following features:
-presentation of summary and detailed reporting information on screen
-a dashboard facility for producing different ranges of information e.g. for consolidated, summary information at a departmental level
-the facility to export reporting data to office applications
current and historical views
-standard and customisable reports
-automated email-based reminder and escalation facility e.g. To risk managers with uncompleted tasks
-vertical and horizontal views e.g. To view the status of all risks classified as ‘Regulatory Risks’
No matter the size or age of your company, and no matter the business you happen to be in, you can definitely improve through the use of operational risk management software.
