It has been a turbulent year for most of the world. Was your company prepared for this? And do you have the full overview of the risks that is involved to meet the next wave? asks Remi Eriksen, DNV Energy’s COO.
The new risk reality companies are facing raises many questions for all industries. Could we foresee the impacts of such events? Were we adequately prepared? Are we doing enough now? Can we do better if something similar happens again? How can we best manage the risks in the future?
It may be a controversial attitude that turbulent times can be loaded with opportunities, not only threats. The fact is that businesses accept risk every day – related to their own risk appetite. As long as you properly can mange the business risks, the business performance will be enhanced.
Enterprise Risk Management (ERM) is the means to achieve this, and is a holistic methodology which is enabling companies to identify, prioritise and manage a range of risks across many disciplines. It is not managed from a financial perspective only, but also from a deep understanding of the operational fundamentals that so often provide the events that lead to human, environmental or financial losses.
DNV experience that a formal, defined top-level approach to ERM governance will improve the mitigation of threats and maximise the capturing of opportunities. This will be delivered by ensuring the Board’s attention to risk issues in a systematic manner, strengthening and checking the risk process applied by an executive team.
It is noted that these benefits are also recognised by credit rating agencies that are increasingly including ERM maturity as part of their assessment of companies, delivering the double benefit of both better risk management and better credit ratings.
In other words, risks can be good – though only if you can manage them.
Date: 23 October 2009