Often in discussions about changing ERP systems the topic of “risk” will arise, as in the risk to the enterprise if the project is not well managed or implemented. But risk is a critical success factor to a company’s entire supply chain, as we are reminded recently in an article from APICS Magazine (“Enterprise Risk Management in the Global Marketplace,” by Gregory L. Schlegel, CPIM).
And did you know that there are actually a set of seven steps that have been designed by the Casualty Actuarial Society “as a discipline by which an organization assesses, controls, exploits, finances, and monitors risk from all sources for the purpose of increasing short- and long-term value to shareholders”?
A risk management framework for the enterprise provides a structure, and a progression of seven foundational steps that help ensure a “wide-angle approach” to risk. We list them below verbatim, as quoted in the Jul/Aug 2015 magazine issue:
- Define the business environment regarding how risk is viewed, the risk appetite and tolerance, and company philosophy.
- Insert risk management into strategic business processes so that risk objectives are consistent with the risk appetite, tolerance and mission.
- Identify internal and external events that could disrupt operations.
- Detail the probability of risk occurrence and the level of organizational impact.
- Develop a risk portfolio of responses to meet each risk type and its severity.
- Detail how event and response information are captured, communicated and monitored.
- Define how to measure the progress of risk response and time to recovery.
Granted, most of us in the smaller business environment can justly content that we’re just too busy to actively pursue the recommended framework. But perhaps it’s worth taking a couple of hours with your team to consider your general responses to the guidelines above (at least number 3!). It may help you sleep better tonight.
And by the way, thank you APICS, about whom you can learn more here.