There Are At Least Eight Domains of ERM so Let’s look at the types of ERM that affect the internal working system of your organization:
Strategic Risk:
strategic goals are just as fundamental to future success. Strategic risks refer to external causes or circumstances that, if they were to occur, would be serious enough to alter the strategic direction of your business, impacting its future success or failure. So strategic risks impact the growth of an organization, including mergers, acquisitions, advertising liability, joint ventures, and other collaborations. Risks centered on performance expectations related to customer and community relations, public reporting, and sentinel events. All organizations are open to a degree of strategic opportunities and threats. Exploring how such changes might affect your organization will help mitigate the issues that might be created and achieve a high-level goal that aligns with and supports its mission
Operational Risk:
Although day-to-day operations are often tried and tested to minimize dangers, incidents or unexpected circumstances could still take place. Operational risk refers to the risk of loss resulting from failed internal core processes, people systems, or external events. Examples include global crises, IT systems failures, and data breaches.
Financial Risk:
Most types of risk have financial consequences, like extra costs or lost revenue.So Financial risks are associated with the organization’s ability to raise and maintain access to capital. for example, a company’s goals cannot be sound enough unless there is enough flow of capital for contracting issues, cost of risk, or vendor support . finance adds value to the organizational potential growth. For example, interest rate risks, cash flow, inflation, and asset value, are a part of financial risk. Financial risks are eligible for risk financing treatments, such as insurance and self-insurance.
Human Capital Risk:
Human capital risk refers to the potential negative impact on an organization's performance, productivity, and competitiveness due to the absence, loss, or underperformance of its human capital. Human capital is the knowledge, skills, and experience of an organization's employees, and it is a critical asset for any organization. Human risks associated with the acquisition, management, and maintenance of your human workforce, including workers’ compensation, turnover, absenteeism, strikes, workplace violence, harassment, and discrimination.
Examples of human capital risks:
o High employee turnover: When employees leave an organization, they take their knowledge and skills with them, which can negatively impact the organization's performance and productivity. Poor employee engagement: When employees are not engaged and motivated, they are less likely to perform at their best, which can negatively impact the organization's performance and productivity.
Environmental risks
Environmental risks refer to the potential negative impacts on an organization's operations, reputation, and financial performance due to environmental factors such as natural disasters, climate change, and changes in environmental regulations. environmental risks are related to safety and security, occupational, and environmental hazards that impact your organization like Pollution, resource efficiency, and Cultural heritage
Legal and Regulatory Compliance Risk:
Legal and regulatory compliance risk refers to the potential negative impact on an organization's operations, reputation, and financial performance due to non-compliance with laws and regulations. These risks can arise from a wide range of laws and regulations, including those related to employment, health and safety, data privacy, and environmental protection. Example risk associated with federal and state-mandated healthcare-related laws and regulations, e.g., HIPAA, CMS Conditions of Participation (CoPs), and state licensure. Also, risks associated with accreditation like ISO or JCI in the health sector.
Technology Risk:
o Technology risk refers to the potential negative impact on an organization's operations, reputation, and financial performance due to the failure or malfunction of technology systems and infrastructure. This can include risks related to hardware, software, and networks, as well as risks related to the management and use of data. Technology risks associated with new technologies, inventory control, biomedical, telemedicine, e-health, e-commerce, information systems, and equipment obsolescence.
Reputational Risk:
All businesses have a reputation to maintain with their stakeholders, including investors, employees, and of course, customers. Decisions made by organizations, as well as incidents where they are liable, can create negative press and significantly affect brand perception. Reputational risk has become of even greater concern for organizations in recent years due in large part to the rise of social media, which allows for almost immediate global communications that make it more challenging for companies to control how they are perceived. Understanding threats to your reputation and how to manage those situations is a must.
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