There is an old saying in management that “whatever gets measured gets managed”. This is truer in the case of risk management. Important data pertaining to risk is often scattered at different places within the organization. This is the reason that there is always a need for an information system that can serve as an integrated platform where information related to risk is maintained. There are many organizations in the world, who have developed these types of information systems. They are known as risk management information systems.
Just like other software solutions, the risk management information system is location agnostic. This means that users can access this system from any location and at any time. It is also important that the risk management information system is tailored to meet the specific needs of the organization.
Features of Risk Management Information Systems
There are some unique features that define a risk management information system. Some of them have been listed below:
At its most basic level, the risk management information system is an incident reporting tool. Using this tool, incidents related to risk are reported. This triggers notifications to all related stakeholders who are then able to manage the resultant claims and risks.
A risk management system is designed based on the risk policy of the organization. It provides a central dashboard wherein the risk position of the company can be known at any given time. It is common to compare this position with the desired position of the company and to take decisions accordingly.
A risk management information system should be capable of collecting data automatically. The whole point of having an information system is that the data is scattered all across the organization. Hence, collecting data tends to take a lot of time. Automatic collection and presentation of data in the right format help make quick and effective decisions. It is a known fact that quick decisions are vital in risk management.
Benefits of Risk Management Information System
Companies all over the world face strict compliance rules. This is because there have been several companies in the past where frauds have occurred. Hence, regulatory authorities want records of important data to be maintained. Risk management information systems are equipped to collect this data and generate reports in the formats specified by the government. This is the reason that they are considered to be valuable by many organizations. Inability to maintain this data and distribute it in a timely manner can lead to lawsuits and fines.
Whenever an organization fails to manage risks, its stakeholders suffer. Also, in the case of large organizations, the information is often covered in the media. Hence, the reputation of the company suffers. Companies invest billions of dollars in creating a brand image. Hence, there is no reason why they would not want to spend a little more and build an information system that would help them protect the brand image.
Organizations have tried to use the cheaper alternative and manage data pertaining to risks via a set of spreadsheets. However, these spreadsheets are not connected to one another. Hence, collating data effectively to facilitate decision-making becomes a challenge. Over the years, companies have realized that it is cheaper to spend money on an information system than to suffer the impact of risks that were not managed appropriately.
The risk management profile of some companies can be extremely complex. For instance, some companies have to deal with documents in a wide variety of languages and currencies. Similarly, large organizations typically have several overlapping insurance policies with different carriers. Risk management information systems help map the insurance or the derivative against the asset which it is trying to secure. This provides a complete picture of the risk profile of the company.
Risk management information systems bring automation to risk management practices. They are designed to collect data automatically. Periodic reports are generated and sent out to the concerned personnel at the required times. In the absence of an integrated risk management information system, all this will have to be done by humans and that would cost the organization a lot more as compared to the cost of the software.
There are some risk management information systems that have intelligence built into them. They can compare the actual risk mitigation plans with the desired risk mitigation plans and can suggest gaps in insurance and other protective measures. Some of these systems can also compare prices and coverages across different vendors and can suggest the best risk management products to buy.
The bottom line is that the concept of risk management largely relies on timely decision-making. Now, decisions can only be made if there is information available that helps to understand the consequences of such decisions. This the reason that risk management information systems have become vital to ensure the smooth functioning of a risk management team.