We live in a world where economic crisis and its consequences continue to take us by surprise even after predictions and conventional risk management strategies. It is not always possible to go by the plan and is sometimes impossible to foresee what’s coming next. Similarly, in enterprise risk management, it is all about lessening the impact of risks we cannot control. Therefore, it becomes crucial to look at all the types of risks businesses face and learn from common mistakes.

We, at TRC Corporate Consulting, extend our trusted services for identifying lessons learnt from enterprise risk management projects and providing insights to reduce losses and impediments. We deliver custom-tailored services to organizations for enterprise risk management and enable them to achieve their business objectives.

Based on our extensive industry knowledge, we were able to map a few errors that many executives commonly practiced for lack of awareness. Let us look at a few enterprise risk management mistakes that many executives commit:

1. To think that prediction of extreme events can manage risks

In the business realm, it is a common practice to focus the enterprise risk management function for extreme events by disregarding all other possibilities that might occur. Instead of trying to predict only extreme events, the management should estimate the possible impact of all extreme level risky events and formulate controls and plan of action for the same.

When taking on opportunities, management should consider the impact and consequences upfront instead of worrying about all the possibilities for the exposure of risk. Enterprise risk management should focus on managing and acting on high impact risk events, rather than spending all the time trying to predict the actual cause of a potential risk event.

2. To think that studying the past will help mitigate future risks

Business executives often use historical data and past to predict the occurrence of future risk events. It is essential to abandon the notion that numbers and statistics are the same as probabilities in the real world; they are not. For instance, sales forecasts can change at any given time. Success and failure are nearly impossible to predict, and businesses must be ready to take on the impact of a random event.

3. To think that what’s mathematically equivalent is not psychologically so

Along with the mathematical complications of quantitative risks in enterprise risk management procedures, it is also equally crucial to realize that different methods of communication may confuse people even if the same mathematical figures are in play.

For example, if you tell stakeholders that, on average, they will lose all their money only every 20 years, they are more likely to invest than if you tell them they have a 5% chance of losing a certain amount each year. The psychological interpretation of both these statements may create substantial differences in the number of people willing to take these risks even though the numbers may be mathematically equivalent.  Make sure to consider equivalent measurements during enterprise risk management to avoid getting tricked by psychology.

4. Ignoring advice about what should not be done

Business executives often focus solely on profit maximization instead of avoiding losses. Enterprise risk management involves treating avoidance of losses and profit-making with the same level of importance. Executives must not forget the possibilities of failure and learn from the common mistakes in enterprise risk management.

Make Enterprise Risk Management More Effective

Enterprise risk management provides a common framework and methodology to manage risks and build a solid foundation for sustainable business success and growth. However, certain blunders might occur if organizations do not respond quickly and resiliently to a presented risk. Learning from other businesses’ mistakes enables you to find the flaws sooner, thus, avoiding any plausible setbacks. Look at some of our enterprise risk management practices:

1. Enable improvement in managing plans for risks and opportunities.
2. Formulate measures to identify risks and lower the likelihood of their occurrence.
3. Implement usage of enterprise risk management data for processing information, creating a register for anticipated risks, and reporting the project risk management database to executive management.
4. Create and present enterprise risk management reports and findings in review meetings regularly.
5. Determine the findings of the enterprise risk management plan and keep a track record of learned lessons.

TRC Corporate Consulting manages the risks your organization might face from day-to-day, and help you identify, measure the degree of those risks, and mitigate them. With our extensive knowledge about the industry landscape, you can be confident that you will receive the best solutions. We value our patrons and prioritize their needs to deliver optimal results. Partner with us for all or any enterprise risk management requirements, and let us help you take your business to another level. For any queries, contact our team!