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Enterprise Risk Management (ERM) is a system that seeks to find out potential risks for businesses. The idea is to find risks and establish a way to prevent or minimize them. Despite coming off as being similar to the traditional risk management, it brings together the whole firm in the evaluation processes. In the long run, it affects business strategy and future actions as it is carried into the critical part of the decisions making process.
ERM follows a simple framework employed in the
process of identifying, dissecting, reacting to and tracking risks as well as
opportunities within the internal and external environment of a business. Some
of the risk response strategies include;
Avoidance: This is ridding the firm of any potential risks.Reduction: It involves lowering the chances for a risk occurrence by considering what can be done to seal any loopholes that seem to be the source of the threats.Share or insure: Evaluates the ideal reaction to either spread or finance threatsAlternative Actions: Involves finding more viable actions for the risks by considering whether there is any solution that can help avert the problem. Accept: The company may make a decision not to take any actions
In a way, the traditional risk management system looks into a problem separately and finds a solution. ERM, on the other hand, does a wholesome view of all the possible risks and establish the link to the potential problems in the firm. An in-depth view and the steps taken to deal with the matters provide the company with maximum protection and the ability to make the most of the perfected business moves that are realized in the whole process.
A perception that people have come to believe is
that ERM only looks at strategic risks affecting a business. However, the
process also identifies oth… Read More
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