How effective is your risk management process?

Risk management ROI is the savings for all managed risks divided by the total cost of all risk management activities, and can be expressed in the following equation:

An organizations cost of risk management is the total investment in the resources required to manage risk. This includes, time spent in risk management meetings, the cost of reporting risk information, the staff to develop risk action plans both for risk assessments and risk controls, etc. The savings realized is the lowest amount of cost expended for each managed risk.

There are two types of savings: avoidance and reduction.

Cost avoidance is the difference between the possible cost incurred without any dedicated risk management completed to the actual cost incurred with risk management applied. An example of cost avoidance is a risk management strategy that successfully contains risk cost to the budgeted amount allocated.

Risk management ROI can also be realized in non-tangible benefits by simply embedding an organizations risk management processes into its existing management and planning practices.

Some benefits that can realized are:

• Increased % of objectives achieved
• Focuses more on the big picture
• Learn from mistakes
• Helps change corporate culture
• More informed decisions being made
• Less disasters and surprises
• Facilitates better business planning thru better strategic awareness
• Higher public satisfaction established
• Reduction in fraud and legal challenges
• Enhances understanding of vulnerabilities
• Breaks down internal silos
• Corporate governance compliance demonstrated
  

Let us help you improve your organizational risk management processes so that you can achieve a return on investment

Learn more about how LC RISQ can help you