Financial, security, data, regulatory and other risks can interrupt business-as-usual activities, negatively impact revenues, and damage the corporate reputation. With so much at stake, it’s easy to forget that the old maxim “nothing ventured, nothing gained” still holds true. Calculated risk-taking is – and always will be – a critical success factor for every business.
So what exactly are calculated risks? Which risks are unavoidable? And which could potentially damage the business? Worryingly, traditional approaches to enterprise risk management don’t always have the answers.
First of all, risk management often focuses on ticking boxes for compliance, rather than helping senior managers really understand and manage uncertainties in their business. And while data exists to help inform better risk decisions and drive transformational activities, it is rarely used for that purpose. This represents a major missed opportunity.
As an additional challenge, risk and performance decisions tend to focus on specific functions, such as supply chain, warehouse management or IT. This siloed approach provides no insight into how functions and processes depend on each other or how the business as a whole is functioning. Again, while all the necessary data is available, many companies are still left in the dark when it comes to mitigating risks and identifying where performance can be improved.
Putting performance first
To overcome these challenges, leading companies are driving new insight from their data and using it to optimise their operations. Often termed “big data” analytics, this approach makes it possible to mitigate all kinds of risks, such as volatile raw material prices, bad weather, technology issues, poor contractor performance, or even political or financial instability in particular regions.
We can help you embed a performance-focused culture across your business
Critically, big data analytics helps companies understand what has happened in the past, what is happening now, and which emerging risks and trends are likely to impact the business in the future. This kind of insight can be used to build realistic, robust business and project plans that can be stress tested, validated and implemented across the business.
But despite the benefits on offer, achieving a joined-up view of a business isn’t easy. This is especially true where siloed systems and functions prevent effective data analysis or where teams manage risks in isolation with no way to escalate their findings to the senior management team.
The EY solution: Risk-Enabled Performance Management
To bring everything together, EY has developed the Risk-Enabled Performance Management (REPM) methodology. This equips companies with the knowledge, experience and technology they need to drive insight from big data and use it to drive performance.
Firstly, we provide operational staff with standard tools for reporting on their daily activities, to give team leaders and senior managers a real-time, enterprise-wide view of operational and financial performance. Based on this standardised, integrated data, managers can intervene to address process bottlenecks and other risks more quickly and effectively.
Secondly, we provide the consultancy and technology solutions needed to drive insight from operational and customer data held in disparate systems across your business. We can also help you harvest and analyse big data from outside your four walls if required, including data from third parties, social networks or other online sources.
Thirdly, we provide collaboration systems that enable teams to share risk data in a timely way across the business, as well as with the board. This is critical, as risk data from specific departments, such as finance, logistics, procurement or health and safety, can frequently impact other departments.
Finally, we can help you embed a performance-focused culture across your business. With senior managers using risk data to inform strategic decisions, and operational staff all pulling in the same direction, your business will continue to thrive and grow.
Putting theory into practice
EY’s Risk-Enabled Performance Management approach has helped one energy generator mitigate risks and stress test its production targets. Based on sophisticated data modelling and analytics, we helped the company to understand where additional maintenance was needed. This insight was used to allocate limited maintenance budgets more effectively and maximise production.
A global mining company has also leveraged EY’s REPM approach to mitigate risk and increase its success. Based on big data analytics, we helped the company understand the effectiveness of equipment, the mean time between failure and the frequency of each kind of failure. It was clear that slowing down production to achieve slower but smoother operations would decrease unplanned downtime and increase production capacity over the year. This is an excellent example of how big data analytics can inform changes that initially seem counter-intuitive, but which help companies increase their performance.
EY’S RISK MANAGEMENT PROPOSITION
Effective risk management isn’t just about protecting your business – it’s also about making it better. EY helps you understand your business risks and develop plans to address them. The quality of our service starts with our 18,000 advisory professionals. We harness their diverse perspectives and experience by bringing together a seasoned multi-disciplinary team to work with you.
We use proven, integrated global methodologies and fresh perspectives in our work. And we work to give you the benefit of our broad sector experience, our deep subject matter knowledge and the latest insights from our work worldwide. That’s how EY makes a difference.
Your journey to REPM
To discuss anything in this article or find out how you can drive valuable insight from your data and make the transition from reactive risk management to Risk-Enabled Performance Management, contact Ben Taylor at btaylor2@uk.ey.com or you can visit our big data site at www.ey.com/bigdata
