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