In South Africa, the eagerness to invest in ERP (Enterprise Resource Planning) systems over ERM (Enterprise Risk Management) is deeply connected to the sectors that dominate the economy and how they operate. Key industries like mining, manufacturing, retail, agriculture, and logistics not only form the backbone of the economy but also heavily influence business operations in other sectors.
Here’s the connection:
Dominance of large, resource-industries:
Focus on efficiency and operational optimization:
Integration with supply chain and logistics needs:
Regulatory compliance and standardization:
Trickle-down effect on SMEs:
The Disconnect: Why ERM systems are overlooked
Despite the clear value of ERM, companies are often reluctant to invest in it. Here’s why:
Perception of ERM as a compliance tool:
Many businesses view ERM systems as a way to simply avoid fines or meet regulatory requirements, rather than as a tool to enhance business resilience and strategic decision-making.
Lack of direct ROI:
Unlike ERP, which offers immediate operational improvements, ERM's value can be harder to quantify. Risk mitigation often prevents potential future losses, making it difficult to justify the investment without a direct and visible return.
Siloed approach to risk:
Many organizations treat risk management as a separate function, isolated from core business operations. This separation reduces its perceived importance compared to systems like ERP, which touch every part of the business.
For an Enterprise Risk Management (ERM) system to provide the same level of value as an Enterprise Resource Planning (ERP) system in the current technology landscape, it would need to evolve beyond its traditional focus on risk mitigation and compliance. The system must integrate more directly into the daily operations of the business and demonstrate clear operational benefits and ROI.
Here’s how an ERM system could achieve that:
Integration with core business functions
Data-Driven decision making and Predictive Analytics
Real-Time monitoring and Reporting
Proactive risk management embedded in daily tasks
Cost and compliance savings
Mobile and cloud-based accessibility
Customization and flexibility
The Real Value of ERM: Risk, Compliance, and Audit Practitioners’ Perspective
To convince boards and executives to take ERM systems more seriously, practitioners need to reposition ERM as a strategic asset rather than just a compliance tool.
Here’s how to approach the conversation:
Highlight the integration potential of ERM with core business functions
Leverage Predictive Analytics and Data-Driven Decision Making
Demonstrate cost savings through compliance and risk reduction
Emphasize real-time Monitoring and reporting
What to Look For in an ERM System
Integrate with ERP systems
Provides real-time reporting and analytics:
Supports predictive risk models:
Offers customization:
Enterprise Risk Management (ERM) should not be seen as a secondary consideration to Enterprise Resource Planning (ERP) systems. By integrating ERM into the core business strategy, leveraging data-driven insights, and showcasing long-term cost savings, risk practitioners can shift the focus of executives and boards. This will help to unlock more budget, allowing businesses to invest in modern, sophisticated ERM solutions that not only ensure compliance but also foster business growth, continuity, and resilience.