It is a known fact that ERM, with its highly structured frame work, can help financial managers to make wise business decisions systematically by having a vivid and holistic view about the potential risks. But it’s high time we analyze whether we are fully utilizing the absolutely stunning potential of the enterprise risk management software. ERM, thanks to its systematic approach in assessing and addressing enterprise risks from every single possible source, boosts the value of your business enterprise. Today, most business enterprises in the financial sector are driven to make use of the ERM software primarily because of the external and internal pressures. The external pressures that affect financial sector are almost similar as the ones that affect the other business sectors. But unique external pressure that affects only the financial sector in United States is the ones coming from the insurer regulators and legislators who want to be sure that their clients and policy holders are protected from the unnecessary risks.
The internal pressure of the financial business sectors comes from the special business conditions and risks that usually occur only in this particular industry. Such risks spring usually from the heavily competitive environment. The role of risk management solutions in financial sector is really crucial because the very nature of the industry is that of shouldering other people’s financial risk. So it is didactically important for them to get their risk management system right to improve the quality of their products and services. A financial institution elevates its status in the market place in terms of credibility when it masters the ERM internally.
This helps them to attract more clients eventually, boosting up their brand value. It is also of prime importance that a financial institution has to get rid of the problems they face concerning increasing competition from unconventional sources, demanding stakeholders and decreasing margins and risk management solutions can be a great help in solving these issues. Great changes and transformation are also happening in the industry in terms of customer expectations, distributions systems and the fundamental changes in the industry. Another big challenge that adds more pressure to the business is the convergence of the banking and insurance sectors. These factors can cause great risks and challenges in your enterprise if you are functioning without the help of a risk management software.
Financial institution managers must get maximum value from their respective business in such riskier situations by making the best decisions about important aspects such as capital, investments/assets, operations and products and markets. ERM is considered as a holistic approach to risk management in any organization. But it is also a fact that financial institutions are not exploiting the holistic potential of risk management systems because most managers are not efficient enough to make most of its facilities and options. So generally it is analyzed that financial institutions are far from benefiting greatly from the risk management software solutions.
To reach the objectives of enhancing growth, increasing return, and improving earnings consistency, financial organizations first need to comprehend the external environment that consists of social and legal trends, the political and regulatory climate, customer behavior, natural catastrophes and economical conditions and competitor behavior. It is also equally important for managers in financial institutions to understand that internal environment which comprises of distributions systems, expansions and diversification of aims and programs, the appetite for risks, organizations structure, intellectual capital, work processes, people capabilities and technology. These aspects form the internal and external financial risks.
Financial institution managers must get trained in each and every option of the risk management solutions so that they can apply that comprehensive knowledge completely to handle their operational and financial risks by even exploiting natural hedges and portfolio effects among the lists of lists when they are treated in groups and not in individual silos. If the managers are trained well in making the most of the risk management solutions, they can benefit a great deal from the software’s state of the art tools for risk management.
About The author:
Sophia Wright is the Marketing Executive. She worked in several process improvement projects involving the multi-national teams for one of the best companies in the world. She has over 5 years of experience ERM risk analyzing process and as a practicing manager of Business analysts, successfully executing several projects in Risk management strategies, ORM Software solutions, Governance risk compliance. Now share your thoughts on HOW HEALTHY IS THE ERM CULTURE IN YOUR ORGANIZATION?.