What is Enterprise Risk Management?

Enterprise Risk Management or ERM can be defined as methods and processes used by business organizations to manage risks and seize opportunities related to the achievement of their objectives.

ERM can provide a framework for risk management by providing the following:

1. Identifying events relevant to the organization's objectives
2. Assessing how likely the event may occur and what type of impact it will have
3. Determining what type of response strategy a organization should have
4. Monitoring the progress

Take a moment to review the ERM process illustrated below:

 http://www.scu.edu.au/risk_management/index.php/2/

 

Why Is Risk Management So Important?

Taking risks is an integral part of growing and sustaining a successful business. All businesses want to protect their assets. Risk Management is a way to do just that. Think for a moment about today's financial markets with extremely volatile ups and downs. In 2008, we started seeing our own financial markets crash along with countless businesses small and large. Many businesses could have been spared if they had the correct Risk Management System in place. You may have experienced this in your own personal financial situation. Many people had all their money in stocks when it should have been diversified into not only stocks, but also cash, bonds, gold, etc. Those who put their money into one financial management firm and lost everything may have been left feeling like risk management strategies in their investment practices would have been good to have. The different systems and tools that we will talk about below could have spared those who lost from risky financial investment activities.

 

Stock market values - 2008

 

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