Everything On ERP Risk Management: From Implementation to Action
You Need ERP Risk Management: Before any implementation or migration, always conduct a ERP risk management assessment. This helps ensure you catch potential risks early, migrate data successfully, and avoid cost overrun.
Well, That Was Easy: To build an effective ERP risk management strategy, start by conducting a risk analysis. Then, assess potential outcomes and mitigate any identified risks.
Monitor Continously: Post-implementation or migration, make sure to continuously monitor your ERP system for new and old risks. Conduct regular risk assessments, tests, and audits to make sure your system runs smoothly and your data is secure.
Once a manufacturing resource planning system, ERP systems took off quickly thanks to their ability to integrate several business functions. But with the growing popularity of ERP software, another problem arose: risk management.
As a tech specialist turned business owner, I understood how to choose ERP software, but struggled with where to begin on risk management. That question alone sparked my deep dive into ERP risk strategy.
Over the past decade, I’ve helped large organizations implement ERP systems with a focus on compliance and control. I’ve seen firsthand how essential risk assessment is to long-term ERP success. In this guide, I’ll share how ERP risk management works, the strategies that helped me start, and practical tips to strengthen your approach.
What Are ERPs?
Enterprise resource planning (ERP) systems are centralized, integrated software solutions designed to manage and streamline various business processes within an organization. This generally includes finance, human resources, supply chain management, and customer relationship management.
While central communication is one of ERPs most common benefits, there are additional perks it provides:
- Improved Efficiency: ERPs automate and streamline business processes, reducing manual effort, increasing operational efficiency, improving decision-making and productivity, ultimately leading to lower operational costs.
- Enhanced Data Visibility: Real-time visibility into your organization’s operations is another benefit that helps you make data-driven decisions. This helps identify trends, monitor performance, and achieve strategic goals.
- Higher Data Quality: ERPs can help your organization mitigate complex challenges during data migration, integration, and beyond. This results in optimal data quality that can, in turn, improve your decision-making and overall business performance.
How these benefits reach your company, however, will change depending on your business model and industry.
For example, a manufacturing company may experience improved efficiency with inventory management and production planning features, whereas a company in the apparel industry may see significant improvements in supply chain visibility and seasonal inventory management.
Why Businesses Need ERP Risk Management
ERP risk management is essential for ensuring a smooth implementation process. Not only does it help you catch potential risks early, such as scattered data, poor reporting, and cost overrun, but it also continues to aid in ongoing operations.
With a solid risk management plan, you can be sure that your ERP system will deliver the benefits you need for business success. However, without one, you’ll likely run into the following challenges:
Getting Started With ERP Risk Management
Now that you know the benefits of ERP and ERP risk management, it’s time to uncover how to get started. When initiating your ERP risk management, I recommend focusing on the following steps:
Conduct a Risk Analysis
Conduct a thorough risk analysis to develop strategies that can effectively mitigate identified risks and ensure the success of the ERP project. I’d suggest, at the very least, identifying potential risks to:
- Project timelines
- Budgets
- Resource availability
example:
Say you work for a SaaS business. Your risk analysis will likely focus on service disruptions, data security gaps, third-party integration issues, and compliance risks like GDPR or SOC 2.
You'll assess areas such as migration integrity, access controls, and cloud reliability to ensure your ERP system won’t compromise performance or trust. This helps you prepare contingency plans, strengthen vendor agreements, and support a smooth rollout.
Assess Potential Outcomes
Evaluate the potential impact of implementation outcomes on your organization. Remember to analyze the likelihood of occurrence and the severity of the impact.
By understanding the potential outcomes of identified risks, you can prioritize their mitigation and allocate resources effectively. This is especially true if you work in highly regulated sectors, like healthcare, cybersecurity, or oil and gas.
Make sure to factor in outcomes relating to these:
- Vendor’s inability to respond or resolve issues
- Resourcing shortages or delays
- Data migration issues
- Integration challenges
- Knowledge or skills gaps
- Changing compliance requirements
Example:
During your ERP risk assessment for your SaaS business, one common risk you may identify is data migration errors. To assess potential outcomes, you will then evaluate how likely those errors are and how they could impact core functions, like subscription billing, customer analytics, and compliance reporting. This helps you determine the severity of disruption, prioritize mitigation efforts, and decide whether additional data validation steps or rollback plans are needed.
Mitigate All Risks
Once you know your potential risks and their outcomes, it’s time to isolate and mitigate them. This step is critical during both the implementation and active stages to improve your project’s chances of success. Here are some of my top tips for mitigating risks at both ends of the project:
- Effectively Manage Your Project’s Scope: Before implementation, make sure to reassess and re-identify potential risks related to scope creep, such as overcommitted resources or additional requirements, and develop strategies to mitigate them. This helps keep your project on track and deliver the intended outcomes.
- Improve Communication and Collaboration: Maintain open lines of communication and engage stakeholders throughout the project and after, to promptly identify and address potential conflicts and associated risks, such as low ERP adoption or ineffective use. This builds a shared understanding of project objectives and ensures that all team members are aligned.
- Improve Your Project Management: Look for opportunities to enhance your project management skills and knowledge, including risk management, or ERP implementation training and certification. Consider webinars, books, or other resources to increase your effectiveness during implementation.
- Provide User Training: Arrange training for your teams and users to improve buy in and user adoption, and to make sure the ERP's features and functionality are optimized.
- Enhance Data Security: This is often not given sufficient time and thought, especially these days, as cybersecurity breaches become increasingly sophisticated. Make sure the implementation vendor you choose is experienced and prepared to help your organization safeguard sensitive business and client data.
Monitor Risks Continuously
Continuously monitor potential risks during the active stage of your ERP system. Conduct regular risk assessments, ERP tests, and audits to ensure the system operates efficiently and securely, maintains the integrity of the systems, and safeguards against data breaches, system failures, and other operational disruptions.
This ongoing vigilance enables you to identify and address potential issues before they escalate into significant problems, while maintaining the necessary audit trails that provide a record of all transactions and changes made within the ERP system.
Use Case: ERP Risk Management Real-World Example
Everything sounds good in theory, but without real-world examples, how can you be sure that this process will work for you? In my career, I’ve been fortunate enough to work with several businesses on ERP strategy, compliance, and implementation.
To help paint a better picture, I’ve outlined a real scenario where I helped a business achieve a smooth implementation process with the steps I discussed above. Here’s how it went:
🎯 The Goal:
Before becoming a business owner, I was a project manager at a larger organization. The company came to me because they needed an ERP system to streamline finance payments and deliver improved customer service in response to changing demands. The initial request was to identify and address potential risks and develop a plan to communicate as part of the project plan.
💡 The Solution:
I collaborated closely with the IT and finance teams to first analyze both current and potential risks. We assembled a team of cross-functional experts to examine the project goals and requirements and brainstorm current and potential risks.
After conducting the risk analysis, we used a risk assessment matrix to categorize and prioritize each risk by type, area, frequency, impact, area of impact, and severity. From there, we developed risk management strategies and contingency plans to address high priority risks, then moved down through the risks with lesser impact, identifying the individuals best suited to address each risk.
Once the project risk management plan was complete, it was communicated to relevant stakeholders, who further vetted the findings to ensure nothing was missed before finalization. It was then incorporated into the broader project plan and executed, while continuing to monitor and update the risk matrix and address any issues that arose.
🚀 The Result:
The outcome was successful. The company experienced an easy ERP system implementation that streamlined the finance payment process and provided customers with the services they wanted—all because of a detailed risk assessment process that caught errors before they occurred.
Top Benefits of ERP Risk Management
As you’ve seen by now, properly managing ERP implementation risks can increase the chances of your project’s success, but there are some other added benefits, including:
Enhanced Data Security
With the increasing prevalence of cyber threats and data breaches, protecting the security of your organization’s sensitive business data is paramount. ERP risk management helps secure data by implementing strong cybersecurity measures and best practices, and by monitoring user access controls.
Compliance Readiness
With the increasing complexity of regulatory requirements, ensuring compliance with industry standards and regulations helps your organization achieve compliance readiness through more transparency, by engaging stakeholders, and conducting regular audits to achieve long-term business success.
Better Decision-Making
Better data transparency and accuracy support your organization in making fact based decisions based on real time information. ERP risk management enables you to implement measures that ensure data integrity and accuracy, providing reliable results and full visibility.
Additional Tips For Better Risk Management
ERP risk management is an essential part of the planning process and it can be complex, especially if it’s your first time exploring it. Here are a few of my tips and tricks that I’ve developed over the years (and that I could’ve used in the past) to help you streamline your ERP risk management journey:
Establish Clear Goals and Project Scope
Before you even start, make sure to clearly define what you want to achieve with the ERP implementation and set boundaries to avoid scope creep. Develop a well-defined project scope that outlines the specific goals, deliverables, and timelines, and communicate this to all stakeholders.
Planning the Post-Implementation Process
The success of your ERP system implementation doesn't end with the system going live. Plan for the post-implementation phase to mitigate risks associated with user adoption and system performance. Training and support are vital components of the post-implementation process.
Also arrange for user training to ensure that all users understand the new system and use it effectively. Your implementation vendor should provide support teams, a help desk, and regular updates to minimize downtime, resolve issues quickly, and maintain system performance.
Selecting a Low-Risk ERP Partner
I’ve worked with many implementation vendors, both large and small, experienced and novice, and I believe it’s essential to thoroughly vet them. Don’t fall in love with hype and tech speak. Talk is free; implementation mistakes and false promises are costly.
Here are some factors I’d weigh as a project manager when selecting a lower-risk ERP partner to help minimize risks associated with implementation, performance, and support.
| Factor | Importance | Questions to Ask |
| Security | Ensures the protection of sensitive data. The vendor should have strong security measures in place to protect sensitive data, including encryption, access controls, and regular security audits. | What security measures are in place? Who provides the security solution and support? Where are the data centers located, and what redundancy measures are in place? |
| Vendor History | This indicates reliability and stability. A vendor with a long-standing history in the ERP industry is likely to be more reliable and stable and can assure that they have the experience and expertise needed to deliver a successful ERP implementation. | How long have you been in business? Can you provide some references? |
| Customer Support | This ensures prompt resolution of issues. A vendor that offers comprehensive support services can help resolve issues promptly, minimize downtime, and ensure smooth system performance. | What support services do you offer? Who provides the support? Will we have a dedicated support team? |
| SLAs (Service Level Agreements) | This guarantees performance and support levels. Vendor agreements should include guarantees on system uptime, support response times, and performance benchmarks. Understanding the terms of the SLAs can help manage expectations and ensure that the vendor delivers the promised level of service. | What are the terms of your Service Level Agreements (SLAs)? Could you provide a sample agreement for our industry? |
Implementation strategies and vendor selection aren’t the only considerations. Before selecting an ERP system, your organization should also understand its choices. Make sure to compare alternative solutions and weigh all your options before committing:
More ERP Resources
I’m a believer in life long learning. While your risk assessment process will take off without a hitch, there's so much more to learn about ERPs and how to make them work successfully for your business. Here are a few of my favorite resources for additional learning:
- Your 2025 ERP Price Guide: What Your System Will Cost You
- How to Complete ERP Migration Like a Pro
- How to Build a Winning ERP Strategy
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