Enterprise Risk Management
No matter your business goals, an enterprise risk management framework (“ERM“) can help you achieve them.
Our Chief Risk Officer talks about what to include in your risk management framework to successfully manage risks and leverage opportunities within your risk appetite.
Enterprise Risk Management
Introduction
No matter your business goals, an enterprise risk management framework (“ERM”) can help you achieve them.
Although every company practices risk management in some way, a formal ERM process puts methodologies in place so that your organisation can systematically increase its ability to achieve its strategic objectives. In the absence of risk management, a company is less likely to meet its business goals consistently, may make poor decisions and be less prepared for changes in the environment in which it operates.
A key impetus for the development of ERM arose from the regulatory requirements for financial institutions. In this context, ERM was focused primarily on minimising identified risks. Over time, ERM has broadened to consider the impact of risks on the ability of the organisation to achieve its strategic objectives.
The COVID-19 pandemic has created an efficient case study that illuminates the importance of risk management. Almost overnight, companies were severely tested by a range of issues, including insufficient employee protections, supply chain deficiencies, and unpredictability in revenue and profitability.
The fundamental elements of ERM are the:
- identification and assessment of significant risks and the implementation of suitable risk responses;
- identification of the appropriate risk response or treatment;
- development of a plan to manage the identified risks;
- development of initial processes to manage identified risks; and
- ongoing evaluation and review of the organisation’s risk profile.
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You may also want to see our article on how Phundex can help you manage your business risks