Serving Your Organisation Through Enterprise Risk Management: A Path to Authentic Growth and Stability

‍Risk is the cost of doing business. Let that sink in.

I propose that by embracing risk with a servant leadership mindset, companies can foster authentic growth, build trust, and create lasting value. This blog post will delve into the key benefits of integrating Enterprise Risk Management (ERM) into your organisation's DNA and demonstrate how it can enhance your company's strategy, reputation, and operational efficiency through real-world examples and stories.

First however, so that we're on the same page, we'll quickly cover off what I mean by Servant Leadership and its relevance to ERM,  its principles, and how it aligns and support ERM to create a more efficient and resilient organisation....all of that before rolling it into a growth strategy remembered through a 5-step mental exercise. Ready? Let's go!

‍

Servant Leadership

Servant leadership, a leadership approach centered around serving others, empowering team members, and fostering a positive work environment, can significantly enhance the effectiveness of Enterprise Risk Management (ERM) practices within an organisation.

1. Fostering Collaboration and Communication: Servant leaders prioritise open communication and collaboration, leading to a better understanding of potential risks and more effective risk mitigation strategies. By encouraging input from all organisational levels, servant leaders cultivate a culture of knowledge sharing and collective problem-solving that can identify and address risks more efficiently.
2. Ethical Decision-Making: Commitment to ethical behaviour and integrity is at the core of servant leadership, aligning with ERM principles that emphasize managing risks consistent with the organization's values and objectives. By ensuring ethical risk management decisions, servant leaders maintain stakeholder trust and support.
3. Empowering Employees: Servant leaders focus on empowering their team members by providing them with the necessary tools and resources to succeed. This approach increases employee engagement and ownership of risk management responsibilities, subsequently improving the overall effectiveness of ERM processes.
4. Emphasising Long-Term Sustainability: Both servant leadership and ERM prioritise long-term sustainability and success over short-term gains. Servant leaders guide organisations through complex risk landscapes by promoting proactive risk management, learning from past experiences, and fostering a culture of continuous improvement.
5. Building Trust and Accountability: By creating an environment of trust and accountability, servant leaders encourage team members to discuss potential risks and challenges openly. This trust-based culture supports ERM by ensuring that potential risks are identified, communicated, and addressed timely and effectively.
6. Adopting a Holistic Approach: Servant leaders consider the needs of all stakeholders, including employees, customers, suppliers, and the community. This holistic perspective aligns well with the ERM framework, which assesses the impact of risks on all aspects of the organisation and its stakeholders.

So depending on how thoroughly you took note of the above, you may have noticed that servant leadership principles can positively impact an enterprise by promoting a collaborative, ethical, and proactive approach to risk management. Basically, by empowering employees, building trust, and focusing on long-term sustainability, servant leaders are ideally situated to help organisations navigate complex risk environments and enhance their overall risk management effectiveness.

‍

Mental exercise: Hold in mind these 5 images to power-up your ERM with servant leadership as a part of your Growth Strategy

‍

1. Nurturing Strategy and Reputation through ERM

A well-crafted ERM program empowers organisations to make strategic decisions rooted in servant leadership principles. By consistently evaluating resource allocation based on risk-return trade-offs, companies can create authentic value and deliver better returns to stakeholders. Additionally, organisations can harness ERM to transform challenges into opportunities, gaining a competitive edge in fluctuating markets or industries facing external obstacles. "Current economic conditions" you say? Yes sir!

Imagine a chessboard, where well-crafted ERM programs serve as your guiding strategy.

Consider Apple, a tech giant that has consistently evaluated resource allocation based on risk-return trade-offs, leading to the creation of authentic value and better returns for stakeholders. By harnessing ERM, Apple has transformed challenges into opportunities, gaining a competitive edge in the ever-fluctuating tech industry.

2. Guiding New Product and Service Development with ERM

When steered by ERM, investments in product quality and safety standards can yield significant returns. Enhanced safety standards may result in substantial reductions in hazardous incidents, while improved service standards in industries like hospitality can lead to higher returns.

Imagine a world where safety standards take center stage, guided by ERM

Volvo, theSwedish automaker, has been synonymous with safety and has used ERM to invest in product quality and safety standards, yielding significant returns. They've basically built the business on a pillar of safety. By doing so, Volvo has experienced increased demand, solidifying its reputation as a safety leader in the automotive industry.

3. Mindful Resource Allocation and Efficiency through ERM

Organisations can leverage ERM processes to allocate resources mindfully and efficiently. By incorporating ERM into the budgeting cycle, companies can prioritise resources based on the most significant risks and update budgets to reflect agreed-upon mitigation costs.

Visualise a garden where resources are allocated mindfully and efficiently

By incorporating ERM into its budgeting cycle, Air New Zealand has been able to prioritise resources based on the most significant risks, such as fuel-price fluctuations, and update budgets to reflect agreed-upon mitigation costs.

4. Enhancing Risk Analytics and Reporting with ERM

ERM supports boards and senior leadership teams in identifying high-impact risks, enabling them to allocate resources and focus on achieving strategic objectives in line with servant leadership values. By pinpointing and mitigating risks that could affect multiple areas of operation, management can maintain and improve performance.

Picture a spider's web, with ERM supporting boards and senior leadership teams in identifying high-impact risks

LEGO, the Danish toy manufacturer, faced near-bankruptcy in the early 2000s but turned its fortunes around by pinpointing and mitigating risks that could affect multiple areas of operation.By prioritising high-impact risks, LEGO reduced surprises and associated costs or losses, while capitalising on favourable developments.

5. Aligning Internal Audit Plans with ERM

ERM offers valuable insights into the internal audit function, fostering harmony between risk management and internal audit processes. Adopting a risk-based approach to internal audit     planning makes risk management outputs, particularly risk assessment outcomes and risk profiles, vital inputs to the internal audit function.

Imagine a symphony, with ERM offering valuable insights into the internal audit function and fostering harmony between risk management and internal audit processes

A major bank, like JPMorgan Chase, follows a risk-based approach to internal audit planning, making risk management outputs, particularly risk assessment outcomes and risk profiles, vital inputs to the internal audit function.