By Neer Rama, Force Solutions Product Manager at thryve
Calculating a return on investment is already a complicated exercise. But in the face of revolutionary changes, ROI becomes even trickier as like-for-like equivalences draw thin. So how do you measure ROI when adopting an integrated risk management system?
A problem for every technology revolution
The transition from steam to electricity is an excellent example of this transition ROI challenge. The rise of electricity in the early 20th century was a messy affair. Attempts at standardization didn’t happen until after Thomas Edison founded General Electric. The first power stations were bespoke and fed power to the businesses that could afford to have the infrastructure laid to their doorstep.
Factories took the brunt of the shock. Steam factories were powered by massive driveshafts that extended through the building. All motorized equipment was connected to the shaft through a variety of belts and gears. Electricity did away with this centralized approach, but it required rebuilding factories around new designs to get things running.
Can you imagine the ROI conversation between a steam magnate and an electricity salesperson? Many companies went bankrupt because they couldn’t wrap their heads around the ROI of electricity.
Today, we face a similar dilemma, though we fortunately don’t have to re-engineer our buildings! Modern digital platforms are not like-for-like replacements of previous computer systems. They offer the chance to reshape business models, processes and roles. Just as steam factories had to rethink their way around electricity, digital platforms are a massive paradigm shift. We have to compare apples with oranges, which will only compound the problematic business of tracking and predicting ROI.
Putting a value on integrated risk management
Integrated Risk Management Systems (IRMS) are one of these paradigm-shifters. Integrated risk is incredibly useful and compelling to an organization. It reaches across silos, aggregating risk-related data from different sources. IRMS also empowers different parts of the company to collaborate with risk activities and incorporate those into their processes.
In other words, it’s a game-changer. But even game-changers cost money, so how can you justify the ROI?
Research leader Forrester has identified five categories by which we can look for the value generated by an IRMS. There are three quantified benefits to track:
● Analytics and reporting automation: the improvements should result in faster reporting and data analysis, such as generating ad-hoc reports within the IRMS.
● Improved processing workflows: traditional risk management software is notoriously labour-intensive with many different interfaces, whereas a top IRMS can consolidate workflows to a single screen, providing drag-and-drop features so users can work more intuitively without navigating multiple applications.
● Retirement of legacy systems: modern IRMS offer far better options and alternatives over traditional licensing, and IRMS web platforms reduce the technology infrastructure a company needs.
It also stakes out two unquantified measures:
● Ability to focus on high-value work: by reducing reporting workloads through reporting and streamlined workflows, skilled employees can focus on high-value tasks.
● Stability in insurance rates: IRMS is integrated for a reason – it enables third-parties such as insurance providers to access relevant company data and make better holistic decisions around risk mitigation.
Other factors that influence IRMS ROI include expanded revenue streams, stabilizing headcounts, and reducing reliance on outsourcing.
At thryve, we implement and support Riskonnect’s IRMS platform. The right service provider can align an IRMS to match your business requirements and enable you to evolve with this new paradigm while still keeping your operations stable. The wrong provider can leave you with an invasive white elephant that won’t live up to your investment expectations. Hence, choosing the best-suited solutions provider is another essential ROI factor.
Revolution is always harder to predict than evolution – and the risk management world is currently undergoing a revolution. Just as with electricity in the early 1900s, the outcomes aren’t clear, and the leaps seem massive. But in hindsight, they are the natural progression to better things.
That hindsight can become foresight and insight through the right ROI indicators. thryve can help you understand that value and explore your IRMS options.
You don’t need to start big. It’s not necessary to rebuild the factory. But that steam driveshaft? It was so last century—time for a change, using ROI to predict your course.