A recent PwC survey shows that 71 percent of financial services executives are moving key IT functions to a cloud-based solution. TOM And, it’s appropriate to close on a quote directly from a Workday Financial Management customer. While conventional enterprise risk management (ERM) techniques have done a reasonable job in identifying and mitigating financial and operational risks, research shows that it is the management of strategic risk factors that will have the greatest impact on your ability to realise your strategic objectives [1]. Strategic risks can be defined as the uncertainties and untapped opportunities embedded in your strategic intent and how well they are executed. Far from holding back the business, strategic risk management is about augmenting strategic management and getting the full value from your strategy. As Figure 1 outlines, effective strategic risk management is built around a clear understanding of how much risk your business is prepared to take to deliver its objectives, and a timely and reliable evaluation of how much risk it is actually taking. The problem is that risk management can often be run separately from frontline strategic assessments, decision making and monitoring against plans. Operational risks are typically managed from within the business and often focus on health and safety issues where industry regulations and standards require. Hazard risks often stem from major exogenous factors, which affect the environment in which the organisation operates.
Second, boards are seeing rapid increases both in the speed with which risk events take place and the contagion with which they spread across different categories of risk. The third shift is that boards feel they are spending too much time and money on running their current risk management processes, rather than moving quickly and flexibly to identify and tackle new risks. These shortcomings reveal that current approaches to risk management are no longer fit for purpose. A good understanding of the key risks to strategic goals and the share price of the organisation requires a good understanding of the strategy itself.

Strategy should be defined in the context of the risk environment in which the business operates.
Where possible, it is useful to consider risk in the context of how shareholders or stakeholders measure value in the organisation.
Encouraging management to understand risk impacts in the context of key performance metrics can be a complex task.
It involves a clear understanding of corporate strategy, the risks in adopting it and the risks in executing it. Boards can thus improve their focus on risk by integrating risk management into their routine strategic evaluation, debate and challenge.
Financial risks are typically well controlled and are part of the routine focus of board risk discussions, with strong impetus coming from the increased regulatory, accounting and financial audit focus. While not all risks can be mapped back to a defined impact on strategic outcome metrics, the discipline of considering risks in this context will help your board to understand the potential impact and define the priorities for managing these risks.
The broader the consideration of the types of risks the business faces, the better the strategy can be developed to respond to or navigate through these risks. Those risks that are going to be of most interest to the board will often be defined by the potential impact of the consequences of the risk manifesting. However, if the key value drivers of the business are well understood by management, determining the potential impact of risk events on these value drivers should be achievable and would be considered part of a good risk management system. As financial information is a key element of stakeholder communications, performance measurement and strategic delivery, board risk discussions will devote considerable time to these risks.
However, there is often a danger that as many of these risks cannot be controlled, boards and senior management will not reflect these in their strategic thinking.
Your board has a responsibility to make sure all these types of risks are included in their key strategic discussions.

First, many executives are worried that the risk frameworks and processes that are currently in place in their organisations are no longer giving them the level of protection they need.
Even the most sophisticated approach to risk can be undermined by a lack of industry insight. Indeed, the external viewpoint that independent directors can bring to the boardroom will play an essential part in ensuring this breadth of risk-thinking enhances the development of strategic thinking. Bringing together the internal risk information from the business, with an understanding of exogenous risk exposures as highlighted by senior management and non-executive directors in particular, should be a key focus of the board.
Scenario analysis with board input can encourage management to consider a range of scenarios that can result in significant adverse consequences for the business and help to make sure a wider breadth of risk impacts are considered than is currently the case. Creating common metrics for risk and performance also allows management to define the priorities of risk management activities and focus on the more relevant risks to stakeholders and the board.
Once they are understood, you can develop effective, integrated, strategic risk mitigation. Confining strategic management to controllable factors will leave your business at risk of failing to address these factors. The challenge your and many other boards face is how to make sure the processes used to review and approve strategy can be extended to include an appropriate consideration of risk.

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