A person interested in business or finance may want to know, “What is enterprise risk analytics?” This refers to a plan or strategy for identifying everything that could possibly go wrong and affect a business’s operations and objectives. This process uses data and puts the onus on the company to identify their risks and take action in order to prevent financial and figurative losses.
Identification of Risks
The identification of risk in enterprise risk analytics is usually done with a framework. There are many frameworks business managers can choose. Those include avoidance, reduction, alternative actions, sharing or insuring and acceptance. Most businesses incorporate all of these into a risk management plan. They do this after using analytical tools to identify the level of risk that each hazard presents. Some of the possible hazards to a business include property damage, natural catastrophes, intellectual property theft, liability torts, product failure, and reputation. Some other risks include social trends, internal poaching, knowledge drain, customer satisfaction, and competition.
Use of Data to Identify Risks
Companies use big data to identify risks. There are software programs that facilitate this process. A variety of data is used for the identification of risks. For example, customer satisfaction surveys, product ratings and reviews may be some inputs for customer satisfaction, reputation and product failure. Economic markers, including consumer sentiment, unemployment numbers, consumer spending, consumer confidence, inflation, and wages may also play a role in the identification of risk. Data related to the stock market, social media and website traffic for a company and its competitors also plays a role in the risk identification process.
Types of Analytical Tools for Enterprise Risk Analysis
Most of the analytical tools for enterprise risk assessment and planning are robust software packages. They include network- or server-based as well as cloud-based tools. Likelihood-Consequence or Probability-Impact, probabilistic risk assessment, and event chain methodology are a few of the processes used in analyzing risk. There are many manufacturers of proprietary software that performs one or more enterprise risk analytics. It is worth noting that interpreting the results of these analytical tools can be objective. Consumer satisfaction is one example. Some consumers only leave a review or complete a survey if they are extremely dissatisfied. It can also be difficult to tell if consumers are leaving unbiased reviews or if they are getting something in return for providing their opinions about products or services.
Benefits of Enterprise Risk Analytics
Businesses that conduct enterprise risk analytics may have an edge on their competition. When a risk presents itself, the business will have an action plan of how to respond. A business with a strong strategy on how to manage risks may find it easier to develop partnerships. According to Investopedia, enterprise risk analytics also help businesses stay in compliance with federal laws. Businesses that know what risks could affect them may have a lower risk of being affected by those risks.
Awareness of enterprise risk analytics could help a person make informed decisions and know more about the processes that take place in the management of companies. This knowledge also helps with understanding how to use the analytical tools and technology that drive the decisions managers make. Knowing, “What is enterprise risk analytics?” could also facilitate a person’s choice of college major or career path.