| Enterprise risk management (ERM) is the | | | | and treatment.The Sarbanes-Oxley Act of 2002 |
| process of planning, organizing, and | | | | became the driving force behind Enterprise |
| controlling the activities of an organization | | | | Risk Management. Financial institutions are |
| in order to minimize the effects of risk. | | | | good examples of companies that have |
| Enterprise risk management includes not just | | | | benefited from effective ERM.There are a few |
| risks associated with accidental losses, but | | | | basic strategies that can be adopted in the |
| also financial, strategic, operational and | | | | process of Enterprise Risk Management. |
| other related types of risks.In recent years, | | | | Experts in ERM recommend a five-year |
| many external risk factors have lead to a | | | | financial plan whereby a business can |
| heightened interest in ERM packages. Industry | | | | identify, prioritize and map all aspects of |
| and government regulatory bodies, as well as | | | | the most critical risks. Businesses must |
| investors, have begun to scrutinize | | | | subject themselves to regular financial |
| companies' risk-management policies and | | | | audits in accordance with government |
| procedures. In an increasing number of | | | | accounting standards. ERM calls for stricter |
| industries, boards of directors are required | | | | corporate governance that provides greater |
| to review and report on the adequacy of | | | | transparency to stakeholders. More |
| risk-management processes in the | | | | empowerment and responsibilities are given to |
| organizations they administer.In a service | | | | Internal Audit Departments. A greater |
| driven economy, businesses cannot afford to | | | | emphasis is laid on the code of ethics.ERM |
| let risks remain unidentified. Currency | | | | improves the way a company handles the more |
| fluctuations, wide distribution channels and | | | | predictable risks that businesses face. It |
| an unprecedented dependence on technology are | | | | allows a company to avoid bad investments, |
| just a few of the new risks businesses must | | | | and conversely, make investments that might |
| assess. Many organizations are choosing to | | | | intuitively seem too risky. Companies that |
| implement an Enterprise Risk Management | | | | have adopted risk management methodologies |
| process to ensure that a uniform approach is | | | | report fewer failed ventures and less damage |
| adopted towards risk identification, analysis | | | | from unforeseen events. |