Despite the growing necessity of robust risk management software for companies of all sizes, it’s easy to think of risk solutions as akin to insurance, like guardrails that prevent a vehicle from careening off a narrow mountain road; the thought of actually needing them in the event of a failure is too unsettling to dwell on.
That functionality is of course important, but what about day-to-day operations and costs? An efficient risk management process starts with identifying and assessing risks and ends with monitoring the effectiveness of risk mitigation strategies, streamlining the operations of the business. This reduces unnecessarily redundant controls and opens new opportunities.
According to The Wall Street Journal, “how much a company pays its auditor depends on how well it safeguards against fraud and reporting errors.” In other words, the audit fee has a direct relationship with the company’s risk assessments, mitigations, and risk monitoring, not with the company’s history of fraudulent activity and errant reporting. Firms with ineffective controls tend to pay more than those who do a better job, according to a new report by the Financial Executives Research Foundation.
Why are audits becoming more frequent?
In recent years, there has been a significant uptick in mergers and acquisitions. This year alone, total M&As have been valued at $3.5 trillion. Such large rearrangements of assets and leadership, in combination with constantly changing regulations and penalties, lead to increased scrutiny by the Public Company Accounting Oversight Board (PCAOB).
Enterprise risk management software fits into this equation in three ways:
- It provides the risk management tools and resources needed to design protections, protocols, and employee education programs, which in turn evidence a firm’s responsibility:
- It protects against negligence charges (and the risk that insurers will deny claims) by demonstrating appropriate controls and due diligence were applied, and;
- It provides libraries of risks, controls, and tests, along with business ERM consulting about best practices. Libraries improve a firm’s control environment and eliminate unnecessary redundancy, which is caused by the silo’d nature of control management without an enterprise platform.
In the event of a cyberattack, software enables you to pinpoint what could go wrong, allowing you to neutralize the problem’s root cause, preventing the attack from turning into a data breach.