The consideration of company-wide risks for operational and strategic corporate management is increasingly one of the most important success factors in order to run a business successfully in the market. Book authors and industry experts alike write that the increasingly globalised competition in deregulated markets, the growing complexity of the business environment as well as rapid developments in the field of information and communications technology open up new opportunities, and yet at the same time pose new risks for companies. With reactive control systems it is going to get more and more difficult to grasp and analyse the complexity of processes and risks.
The detection and documentation of risks, as a basis for deciding upon measures intuitively, is not sufficient any longer in order to face the new challenges. Similarly, the proactive recognition of potential violations with regard to governance obligations and the management and documentation of GRC (governance, risk management and compliance) processes is too short-sighted.
The current managerial change with regard to company-wide risk management is analogous to the development of corporate accounting, materials handling and production planning in the early eighties and nineties, where operational corporate management was rigorously integrated into an enterprise resource planning (ERP) system.
Those who solely rely on using the rear view mirror as a navigational instrument for facing risks instead of proactively capturing the information from the entire cockpit, will lose sight of the big picture. The past is already set in stone and cannot be controlled. Opportunities and risks lie only on the way forward. In this regard, risk is defined as the possibility to miss targets – resulting from the unpredictability of the future and caused by ‘random’ disturbances. Chances, on the other hand, are possibilities to overfulfill these goals and to be better than planned.
A next-generation risk management system is more than just an archiving system in which the risks and opportunities inventory is maintained and evaluated with regard to its compliance with current standards. It is a navigation system that helps you find and plan the right way forward and to stay on track. The new generation of risk management systems is an integrated information system which allows for objectives to be pursued, strategies to be analysed and potential deviations to be predicted and identified.