Enterprise risk management and how to head off a crisis early

Crisis is always a phrase that businesses fear having to face in the course of building and developing their brand. Let's explore the importance of enterprise risk management in preventing crises from occurring in the article below.

What is enterprise risk management

Risk management is the process of identifying, analyzing and proposing ways to manage the risk factors that have occurred, are occurring or may occur to a business. This concept is typically used in the sense of controlling risks in future events — knowing in advance helps companies proactively prevent problems rather than having to react and manage after everything has already happened.

>> Learn more: Top 9 issues in enterprise risk management

What is a crisis

A crisis is defined as an emergency situation, an unexpected threatening situation that lies beyond the control of the entity involved. Corporate crises tend to attract considerable attention from the press and media, and they seriously affect the reputation and brand of an individual or a company. A crisis is considered an event that spreads information through society in a negative direction, causing major losses for the entities and parties involved.

The role of enterprise risk management in dealing with crises

Identifying potential risks

Thanks to risk management, businesses will be able to identify the risks they may encounter in the future. After that, the business will proceed to classify those risks in specific terms.
Below are four types of risk commonly encountered in business:

• Strategic risk: This type of risk typically arises when companies fail to assess their target market in advance. This causes the strategy preparation process to fall short of the desired effectiveness, leading to failure in execution.
• Brand risk: A brand is important to every business. When a brand runs into avoidable incidents such as dishonesty or a lack of respect for consumers, it will have a major impact on the company's business operations.
• Competitive risk: In the business environment, companies are always competing fiercely with one another. As a result, if a business falls too far behind its rivals in business strategy, communications strategy and so on, the company will lose its advantage relative to its competitors.
• Legal risk: Laws in Vietnam are changing very quickly, and if companies do not regularly keep up with legal updates, they may find themselves entangled in legal trouble.

Building a risk response plan

The purpose of developing a risk assessment plan is to provide a clear path for resolving any potential issues that may arise. For each risk identified, the enterprise risk manager will design a response plan suited to that particular type of risk.

• Risk transfer: This method transfers all or part of the risk to the people or units involved in the incident.
• Risk avoidance: This measure should only be applied to major risks that cannot be remedied, because while applying it, companies must halt all projects and strategies that carry risk. This will have a major impact on the company's business operations.
• Risk acceptance: With this approach, companies have foreseen the risks that may occur with their projects and they accept these risks in order to secure potential benefits for the company.
• Risk control: This measure requires management levels to continuously evaluate and take action so as to respond quickly to the damage that risks will cause.

Measuring brand health

Measuring Brand health can help Businesses identify the shortcomings that need improvement and attract customers. Moreover, this approach also helps you identify your Brand's strengths, providing detailed blueprints for developing your Brand strategy.
Brand health is one of a Business's most important assets, allowing the Brand to stand out and differentiate itself from competitors in the market. In addition, measuring Brand health will help a Business know whether, when a crisis occurs, the Brand is resilient enough to face those risks.

Have a communications plan to resolve the crisis

After a crisis breaks out, waves of reaction from customers and interested parties will make the crisis progressively worse. Therefore, if a Business has prepared an effective corporate risk management plan for itself, immediately issuing communications strategies or press releases intended to set the record straight with customers and the community will significantly reduce losses for the Business. At the same time, when a Business has established a communications plan for potential crisis events, executing and deploying that plan will happen more quickly and promptly.

Tips for effective corporate risk management

Regularly update and evaluate your communications strategy

After communications campaigns are carried out, alongside continuously updating the metrics related to KPIs, engagement and reach in order to assess how effective those communications campaigns are, communications managers also need to pay attention to how the community reacts to those communications materials. This helps Businesses clearly grasp the situation of their campaigns and whether any campaign is becoming entangled in a communications crisis on social media and in the press. At the same time, before running a communications campaign, communicators need to evaluate the material thoroughly to ensure that it does not touch on sensitive issues such as culture, politics and the like, so as to limit the risk of a crisis.

Use a Social Listening tool

In order to control and assess risks that have arisen and those that are about to, Businesses should consider using a Social Listening tool. A Social Listening tool is simply understood as a media management tool that listens to and monitors users. It is a solution that supports tracking customer feedback about the Business across online channels, or researching competitors and products.
Social Listening plays an important role in building the Brand's image in consumers' minds. This solution helps Businesses build a suitable content marketing strategy, manage products and interact with customers highly effectively. From there, a Business can understand customers' thoughts, questions and answers. In particular, Social Listening can detect latent risks by tracking and analysing customers' social media journeys.

Consult companies that provide corporate risk management solutions

For Businesses that lack the resources to carry out risk management themselves, they can look into the services of outside companies.
Kompa is a company that applies data technology (AI, machine learning) on a Big data platform to deliver data analytics solutions, equipping clients with valuable "insights" to optimize their business operations across many areas such as Marketing, Finance, Operations and other fields.
Kompa works alongside small, medium and large enterprises in Vietnam such as: Vingroup, Masterise Homes, Vinamilk, SSI, MB Bank, Tân Hiệp Phát, Shopee, Vietjet Air.
With Kompa's enterprise risk management service, clients receive data reports that flag negative information, along with approaches and scenarios to address and prevent emerging risks quickly, 24/7. At the same time, Kompa helps you trace the origin of the crisis and optimize positive information to balance the conversation around the incident, while limiting the spread of negative information on social media.

Conclusion

The article above has made clear the importance of enterprise risk management. It also offers tips for managing communications effectively for businesses. We hope this article proves useful to businesses in managing risk effectively.