What is Enterprise Risk Management (ERM)?
Enterprise risk management (ERM) is the process of planning, organizing, directing, and controlling the activities of an organization to minimize the harmful effects of risk on its capital and earnings. ERM can include financial, strategic, and operational risks, as well as risks associated with accidental losses.
ERM is an organization-wide strategy enacted to identify and prepare for potential hazards. Because risk management requires the understanding and analysis of the possible risks an organization might face, the ERM process must be proportionate to the size and complexity of the organization. ERM is designed to manage and identify risks across an organization and its extended networks.
ERM is a holistic approach to managing risk, which requires a broad, management-based strategy. This means that instead of individual business units managing the risk, a company-wide approach is preferred.
ERM standards have been formalized through frameworks such as the Committee of Sponsoring Organizations (COSO), an industry group that maintains and updates ERM standards.
What is Enterprise Risk Management (ERM)?
Enterprise Risk Management (ERM) is a way to manage risks by looking at the entire company. It is a top-down strategy that tries to identify, assess, and prepare for possible losses, dangers, hazards, and other risks that might affect the company’s operations and goals. The goal is to prevent these risks from causing harm or losses to the organization.
As a society, we need to take risks to grow and develop. From energy to infrastructure, supply chains to airport security, hospitals to housing, effectively managed risks help societies achieve. In our fast-paced world, the risks we have to manage evolve quickly. We need to make sure we manage risks so that we minimize their threats and maximize their potential.
Risk management involves understanding, analyzing, and addressing risk to make sure people and organizations achieve their objectives. So it must be proportionate to the complexity and type of organization involved. Enterprise Risk Management (ERM) is an integrated and comprehensive approach to managing risk across an organization and its extended networks.
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