| One of the most critical challenges for businesses | | | | 3. Improves business performance. |
| today is determining how much risk they can tackle | | | | The end result is a more robust risk management |
| to create value. Research indicates that six out of | | | | process. |
| ten senior executives lack confidence in their | | | | You must bear in mind that ERM is a journey, not a |
| company’s risk management practices. | | | | destination. It represents a sea change in |
| If you want to be one among the four who are | | | | organizational attitude and behavior. Like any other |
| confident in handling risk, read on and enhance your | | | | important change, the adoption of ERM is basically a |
| knowledge of ERM. | | | | process of building awareness, implementing and |
| Enterprise Risk Management (ERM) is defined as the | | | | ultimately driving ownership throughout the |
| process of planning, organizing, leading and controlling | | | | organization. What makes it all the more challenging is |
| the activities of an organization in order to minimize | | | | that in any organization, individual perspectives about |
| the effects of risk on its capital and earnings. | | | | risk will differ. |
| ERM is a new approach to risk management which | | | | Therefore, consider the following while implementing |
| differs from traditional ones in terms of focus, | | | | Enterprise Risk Management: |
| objective, scope, emphasis and application. Under the | | | | • Set objectives bearing in mind your |
| new approach, the uncertainties that can affect both | | | | company’s capabilities. For example, are there |
| tangible and intangible assets of the organization are | | | | any cultural issues that might come in the way of |
| taken into account. Hence, ERM will help you align | | | | enterprise-wide implementation? |
| your organization’s strategies, people, processes, | | | | • Develop an ERM plan and set priorities for |
| technology and knowledge so that the company is | | | | implementation. Discuss the plan with your team |
| well equipped to handle risk. | | | | members and seek their opinion. |
| Again, by addressing the need for internal control | | | | • Delegate responsibilities for the role of designing, |
| measures, ERM helps your company anticipate and | | | | building and monitoring the implementation process. |
| manage uncertainties better. It also enhances the | | | | • Integrate the risk management process with |
| enterprise’s value in the three ways listed below. | | | | your business plan. |
| 1. Creates sustainable competitive advantage. | | | | Last but not least, be sure to factor in future goals |
| 2. Optimizes risk management cost. | | | | and capabilities for managing critical risks. |