Enterprise Risk Management 

ERM which is called as enterprise risk management is the model that industry follows to reduce risk. The company checks whether they are having a correct objective and target which makes the organization to minimize the risk. It provides a framework to avoid risk. The main use of this is that by identifying the risk and opportunity the organization is providing value to shareholders shares. The credit rating companies will scrutinize these model of the organization in order to rate the value of the organization. The primary risk facing can the company can be identified by finding the risk management ability of the company. This management ability of the company can be estimated by evaluating the enterprise risk model of the company.

Implementing the Enterprise risk management in an organization follows the following steps,

• Goals of an ERM program are process of identifying the central goal of an organization in minimizing the risk. The big organization will have various departments to evaluate and manage risk. These departments need to coordinate among themselves and strive towards a common goal this is called as goal of the ERM of the organization.  

• Typical risk function in ERM program are  

  • Strategy risk is a risk which have some flaw in the basic strategy formation itself.
  • marketing risk is a risk caused due to the flaw in the market function. It can be economic crisis as well.
  • Compliance and ethics risk
  • Law related risk caused due to change in law by the central or state government.
  • Insurance risks are caused by the unavailability of the risk hedging process.

• Common problem in implementing the ERM program

  • Identifying the executive sponsor for the program
  • Establishment of a risk languages which is common to all.
  • Identifying and measuring of the risk in the risk inventory.
  • Prioritize of the risk based on the ranking.
  • Determination of the cost benefits analyses for the risk.
  • Developing report for the risk.
  • Monitoring the action taken to avoid risk.

Questions:

• What are risks function considered in ERM program?
• What are the various problems in implementing the ERM program?