The Benefits of an Automated Risk Assessment Process

The methods, processes, and global context of risk assessment and management have evolved significantly in recent years. With the rise in corporate social responsibility and rapidly changing regulatory requirements, organisations have a lot to keep up with when it comes to managing risk. The many facets of industry and society have come together to require a much more comprehensive and sophisticated approach to risk management. For businesses and organisations, this means it’s time to rethink what has been the standard for risk assessment and management in the past. Organisations have to meet extensive regulatory requirements  to maintain risk compliance, as well as uphold corporate social responsibilities in various forms, including bribery and corruption, ESG, and third-party risk. How has risk assessment evolved in recent years? What are the roles and benefits of automation in risk management? Let’s explore.

The Evolution of Risk Assessment

Seeing the big picture

Previously, short-term goals and reporting were the primary focus of organisations trying to meet regulatory risk requirements. Now, however, governments and companies alike are placing a much greater focus on the big picture. While there are individual facets of risk that may have been addressed separately before, government groups are now approaching them by understanding how risks impact each other. For example, there are direct correlations between ESG and ABAC risks, and countries are honing in on how to most efficiently utilise resources to tackle these risks. As countries work together to create a global culture of risk management, governing agencies are adjusting short-term and long-term goals to align for the fight against all forms of risk. For example, the United Nations Climate Change Conference, COP26, resulted in the adjustment of climate change risk goals for organisations. COP26 set long-term goals for climate change adaptation efforts by 2030 and 2050, while also moving short-term requirements up from 2025 to 2023. For businesses, seeing the big picture goes beyond meeting certain regulatory requirements. When it comes to climate change, for example, member countries of the Glasgow Climate Pact agreed to cut emissions by specific rates based on different company factors. Looking at the big picture, however, will require businesses to not only cut emissions, but to understand how every element of their operations can be more sustainable and to take the initiative to invest in sustainable alternatives and partners.

Corporate social responsibility

Organisations and their stakeholders are putting greater emphasis on their perception in the eyes of the modern consumer. As millennials take up greater space in the investment landscape, the millennial opinion is having a new impact on corporate social responsibility (CSR) decisions. In fact, 41% of millennial investors put a significant amount of effort into learning a company’s CSR practices, compared to only 27% of Gen X and 16% of baby boomers. It’s not only millennials, but 77% of consumers are motivated to purchase from companies committed to corporate social responsibility. These rates are too important for organisations and their stakeholders to ignore: 44% of corporate executives say that their company does not currently have a strong sense of social responsibility but is in the process of developing one. Further, 58% of organisations that say they do have a clear sense of CSR experienced 10% or greater growth in the last three years.

Third-party risk management

To keep up with modern requirements and challenges of corporate risk, surface-level internal accountability and assessment are no longer enough. Possible risk experienced by your third-party partners in your supply chain reflects negatively on your organisation. As a result, 54% of organisations expressed having some meaningful experience conducting third-party risk assessment, and 42% indicated that they intended to invest in automated risk assessment tools during 2021.

What Is Automated Risk Management?

Automated risk assessment tools allow organisations to screen supply chain partners with an efficient system, typically an Advanced Predictive Risk and Resilience Indicator (APRI). The right solution will enable companies to screen third parties for any number of relevant criteria. These criteria can include, but are not limited to media mentions, company policies, historical data, and more. After evaluating risk criteria, the solution will aggregate data and score current and potential third parties for evaluation of partnership. With predictive automation, companies can be confident in the screening process of third-party partners without missing important risk indicators.

Automated Risk Management Benefits

Efficient screening

An automated risk assessment tool is a characteristically efficient and configurable method to benchmark, assess, and score all third parties within your supply chain, giving you unparalleled visibility and insight into your ESG ratings and overall status.

Up-to-date regulatory alignment

A sophisticated solution will keep your organisation updated with all relevant regulatory requirements and governing agencies to ensure that analysed risk is done according to current protocols.

Risk-based insights

Use automated risk management to identify both current risks faced by your supply chain, as well as the propensity of your suppliers to be resilient to such issues – seamlessly bridging the gap between present and future risk. With all the relevant data gathered into one centralised location, businesses are empowered to utilise these insights to make informed decisions about sustainable and effective business practices.

ethiXbase APRI

EthiXbase offers the leading automated risk assessment tool to help organisations stay on top of third-party risk. The APRI extracts key risk data about suppliers to identify any negligence or potential mismanagement within your supply chain. Coupled with our in-house resilience modelling algorithm, the automated risk management solution provides an ideal environment to confidently future proof your supply chain operations. Along with the risk management solution, the APRI screening method is the starting point for a holistic risk management process. This first essential level of screening checks large supply chains for negative media risk, as well as the resilience of their policies, against major pillars of risk, such as labour, human rights, environmental impact, and anti-corruption. From there, our uniquely powerful SaaS platform enables you to completely manage and monitor your third parties before incisively escalating due diligence on those suppliers that the APRI has identified as possible risks.

Automated Risk Management Solutions with ethiXbase

Risk assessment and management is evolving, but with the sophistication of automated risk management technology, there’s no reason to fall behind. Risk automation empowers organisations to not only stay in line with frequently changing regulatory requirements, but also to make informed decisions for the sustainability and efficiency of their operations and supply chains. To learn more about ethiXbase’s APRI, the leading automated risk management tool, request a demo today.

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