RISK MANAGEMENT

Enterprise-wide approach to risk management



Abstract

The aim was achieved through the analyses of the fundamentals of ERM, associated theories and practical implications. The study is conducted through various research papers and theories provided by the experts. Today's challenging global economy brings business risks and opportunities and are not stagnant for long. There is a need for assessment, identification, monitoring and management of the organization's business opportunities and risks. The aim was further achieved by going through the questions like how does an organization take practical steps to link opportunities and risks when managing the business? As it is an ongoing process flowing through the entire organizational structure and affects people at each level of an organization also plays its part in strategy-setting. According to the theories it is designed for identification of potential events which might directly or indirectly affect the enterprise and keep risk within the appetite of risk and must be able to provide proper assurance to an entity's management and board. It should be aligned to the achievement of objectives in one or more overlapping but still separate categories so this is “a means to an end, not an end in itself.”

ERM establishes the control, oversight and discipline for continuous improvement of an organization's risk management capabilities in a dynamic environment. It matures the organizations capabilities of managing its priority risks. (Coso 2012, p.9)

Enterprise-wide approach to risk management

Introduction

Aim and Objectives

The aim of this study is to analyze enterprise risk management. Enterprise Risk Management is a structured business tool which aligns strategy, technology, processes, knowledge and people having the purpose of management also evaluation of the uncertainties that enterprises usually face. It is a future focused, holistic, integrated and a process based approach that helps an organization to manage its key business opportunities and risks , and this is accomplished through an enterprise-wide view of risk by removal of traditional business unit, functional, segment/division, departmental or cultural barriers. Through the understanding of the UK standard risk management is a critical part of any organization's strategic initiatives. It is a process through which organizations methodically address the risks attached to their activities in light of achieving steady benefit within every activity across the portfolio of the total activities, and as (Nocco, and Stulz, 2006, pp. 1-4) explain the behind story of the emergence of the new and improved risk management system, role of risk management has faced a dramatic change in the in organizations.

A few decades back, the corporate risk manager typically positioned in the treasury was majorly involved in the insurance purchase and the treasurers were responsible only for foreign exchange exposures and hedging of interest rate, but since last ten years, CRM has expanded way beyond the hedging of financial exposures and insurance, now including a new set of risk specially reputational risk, strategic risk and most recently operational risk. (Steinberg, 2004, p.7).

Practical implication

If ERM is straight forward, its implementation could get challenging. To implement ERM successfully, it is very important ...