ENTERPRISE RISK MANAGEMENT
In today’s challenging global economy, business opportunities and risks are constantly changing. There is a need for identifying, assessing, managing and monitoring an organisation’s business opportunities and risks. The question is: How does an organisation take practical steps to link opportunities and risks when managing the business? And further: What does this have to do with risk management?
Enterprise Risk Management (ERM) is an organisation’s enterprise risk competence — the ability to understand, control, and articulate the nature and level of risks taken in pursuit of business strategies, coupled with accountability for risks taken and activities engaged in, which contributes to increased confidence shown by stakeholders.
The basic concept of ERM has been applied, more or less, in several industries for well over a decade. The changing regulatory environment, economic turmoil, and growing complexity of products, tools, and risks has, among other influences, helped to launch the practice of enterprise risk management both in the private as well as the public sector. In this respect ERM, compared to other business practices, is very much in its early development, though much progress has been made.
By definition, the business of an organisation exposes it to a wide variety of risks and organisations operate in an inherently risky environment. Risks include financial risks, operating risks, strategic risks, regulatory risks, environmental risks, reputational risks, political risks, and a whole host of other types of risks. Managing this portfolio of risks is especially important to help ensure the organisation can continue to serve its clients. By strategically managing risks, organisations can reduce the chance of loss, create greater financial stability, and protect their resources.
The ERM framework is designed to support the depth and breadth of activities by providing a structured approach for identifying, measuring, controlling, and reporting on the significant risks faced by an organisation. This programme offers ideas, suggestions and insights to employees responsible for ERM and is intended for use as a reference tool for the management of risks in an organisation.
Written by: Dr Chris Hendriks