Risk Management Information System
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.
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The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.
- Risk Management - Introduction
- Benefits of Risk Management
- Principles of Risk Management
- Risk Management Process
- Risk Identification and Assessment
- Aspects of Risk Management
- Steps in Risk Management Process
- Approaches to Risk Management
- Risk Management Policy
- Commonly Used Measures of Risk
- Risk Management Plan
- Evaluation of Risk Management Plan
- Risk Treatment
- Role of HRD in Risk Management
- Enterprise Risk Management
- Implementing ERM
- Risk Management and Stock Market
- Outsourcing Risk Management Program
- Risk Management as a Profession
- Anticipating and Mitigating Organizational Risks in the Digital Age
- Challenges Facing the Australian Economy
- The Economic Costs of MeToo
- Automated Claims Processing
- Challenges in Global Insurance And International Claims
- Conflicts of Interest in the Insurance Business
- The Cost Structure in the Insurance Industry
- How Drones Will Impact the Insurance Industry?
- How Is Health Insurance Funded?
- How Self Driving Cars Impact Insurance?
- How Stock Market Volatility Affects Insurance Companies?
- Insurance Agents vs. Insurance Brokers
- The ABCs of Insurance Fraud in India
- Technological Advances in the Insurance Industry
- The Basics of Unemployment Insurance
- The Pros and Cons of Unemployment Assistance and Why it Matters in the Present Times
- The Role of Insurance In #MeToo Movement
- Why the Flood Insurance Market should be Privatized?
- Basics of Pet Insurance
- Cannabis Insurance
- Challenges Facing Cryptocurrency Insurance
- Evolution of Insurance Regulation
- Food Delivery Apps and Insurance
- How Does Captive Insurance Work?
- On-Demand Insurance
- Reinsurance vs. Double Insurance
- Solvency Regulations in the Insurance Industry
- Terrorism and Insurance
- The Basics of Microinsurance
- The Basics of Reinsurance
- Types of Captive Insurance Companies
- What is P2P Insurance?
- How Risks Affect Companies Providing Financial Services
- Risk Management Information System
- Disadvantages of Risk Management Information Systems
- The Known-Unknown Classification of Risk
- Operational Risk: Definition and Drivers
- How Regulations Have Affected Operational Risk?
- Identification of Operational Risks
- How to Identify Operational Risks
- Using Internal Loss Data to Mitigate Operational Risks
- External Loss Data in Operational Risk Management
- Risk Control Self Assessment (RCSA)
- Scenario Analysis in Risk Management
- Key Risk Indicators
- Basel Approaches in Operational Risk Management
- The Basel Risk Categories
- Cause Categories in Operational Risk Management
- Loss Distribution Approach
- The COSO Framework for Internal Control
- Mistakes to be Avoided While Building a Risk Management System
- Credit Rating Terminology
- Types of Exposures to Determine Credit Limit
- Types of Credit Events
- Active Credit Portfolio Risk Management
- Metrics to Measure Credit Risk
- Credit Derivatives: An Introduction
- Credit Linked Note
- How do Credit Default Swaps Work?
- Why are Credit Default Swaps Dangerous?
- Total Returns Swap
- What are Collateralized Debt Obligations and How do they Work?
- Collateralized Debt Obligations: Advantages and Disadvantages
- Mark To Market Accounting
- What are Recovery Rates? - Different Types of Recovery Rates
- Netting, Close Out, and Acceleration
- Expected Default Frequency (EDF)
- Expected Default Frequency: Advantages and Disadvantages
- Altmans Z Score Model
- Unexpected Loss and Economic Capital Buffer
- Stress Testing in Credit Risk Management
- Provisioning in Credit Risk Management
- How Corporate Governance Impacts Credit Risk
- Exit Strategies In Credit Risk Management
- What is Market Risk? - How its Measured and Sources of Market Risk
- Why is Market Risk Management Important?
- Introduction to Value At Risk (VaR)
- The Three Types of Value at Risk (VaR)
- Marginal, Incremental and Component Value at Risk (VAR)
- How Value at Risk (VaR) is Implemented?
- Backtesting Value at Risk (VaR)
- Advantages of Using Value at Risk (VaR) Model
- Disadvantages of Using the Value at Risk (VaR) Model
- How Margins Are Calculated Using Value at Risk (VaR)
- Market Risk Limits
- Tail Risk
- The Upside of Market Volatility
- Relationship between Volatility and Risk
- Importance of Data Quality in Risk Management
- Impact of Using Poor Quality Data and Metrics to Measure Data Quality
- Enterprise Risk Management (ERM) vs Traditional Risk Management
- Benefits of Enterprise Risk Management
- Corporate Risk Governance
- International Risk Governance Committee (IRGC) Framework
- Failure of Market Risk Management
- Mistakes to Avoid in Risk Management