It’s Your Choice: Business Versus Risky Business

When looking at Enterprise Risk Management (ERM) within organisations, it becomes evident that this needs further clarification. The process of ERM is something that we may unknowingly follow in our daily lives, for instance, when planning to go on holiday or planning our next business venture, we evaluate all the risks involved and the process that needs to be undertaken to ensure they are minimised.

The same can be said for any business whereby the risks need to be evaluated in order to be effectively managed, to ensure they do not become detrimental to the business in the future.

One of the main reasons that organisations are hesitant and may not have adopted an ERM process is because theorists and consultants may have unintentionally made the risk management concept and process look and sound complicated.

ERM was not discussed as widely as it is today as business leaders and managers saw this as an unnecessary process which was inefficient and at times an overhead. Only the financial services institutions such as banks and large organisations would adopt the method given the level of risk that was presented. However, when we look at the business environment and the changes in technology which have given people greater access to information, we see an increased level of risk.

The changing dynamics of the economy and the global market-crash further reinforced the need for risk management and highlighted how essential it was for organisations to protect themselves against uncertainties in order to minimise the risk and probability of personal, financial and reputational lose. However, the problem is that some business leaders are still hesitant, judging the ROI and asking what is the benefit for them and their business?

There is still a lot to be done, especially within the UAE, in order to enhance the awareness and knowledge of ERM amongst the business community. The mystery should be removed from the ERM process to reveal that it is in fact a simple and straight forward mechanism. It should be known to everyone that the ERM process is one of the main tools that enables directors and managers to take various strategic, financial and operational decisions when assessing the probabilities and making a professional judgment.

However, awareness of ERM is gradually increasing within government institutions and local businesses who continue to lead change within the region. They are beginning to establish, develop and implement processes and functions, setting training plans and buying innovative software to support in mitigating risk. This positive change is also encouraging the private sector to follow.

Locally, the construction and real estate sector has being buoyed by the Expo 2020 win and technological developments seen within the region, and this further raises the red flag of risk protection. It is known that in periods of change within the market, exposure to various types of risks is extremely high. Greater demand brings increased risk, which presents greater opportunities for potential fraudsters to leap on any weaknesses and deficiencies in the process and system.

It is the ultimately the responsibility of the board of directors, CEOs, CFOs and other key managers of any organisation to build integrated comprehensive systems of internal controls and risk management. Otherwise, it may prove to be very costly resulting in the loss of shareholders’ wealth, tarnishing the credibility of the business leaders and trust of investors and damaging the reputation of the business.