Enterprise risk management (ERM) is the process of planning, organizing, and controlling the activities of an organization in order to minimize the effects of risk. Enterprise risk management includes not just risks associated with accidental losses, but also financial, strategic, operational and other related types of risks.
In recent years, many external risk factors have lead to a heightened interest in ERM packages. Industry and government regulatory bodies, as well as investors, have begun to scrutinize companies’ risk-management policies and procedures. In an increasing number of industries, boards of directors are required to review and report on the adequacy of risk-management processes in the organizations they administer.
In a service driven economy, businesses cannot afford to let risks remain unidentified. Currency fluctuations, wide distribution channels and an unprecedented dependence on technology are just a few of the new risks businesses must assess. Many organizations are choosing to implement an Enterprise Risk Management process to ensure that a uniform approach is adopted towards risk identification, analysis and treatment.
The Sarbanes-Oxley Act of 2002 became the driving force behind Enterprise Risk Management. Financial institutions are good examples of companies that have benefited from effective ERM.
There are a few basic strategies that can be adopted in the process of Enterprise Risk Management. Experts in ERM recommend a five-year financial plan whereby a business can identify, prioritize and map all aspects of the most critical risks. Businesses must subject themselves to regular financial audits in accordance with government accounting standards. ERM calls for stricter corporate governance that provides greater transparency to stakeholders. More empowerment and responsibilities are given to Internal Audit Departments. A greater emphasis is laid on the code of ethics.
ERM improves the way a company handles the more predictable risks that businesses face. It allows a company to avoid bad investments, and conversely, make investments that might intuitively seem too risky. Companies that have adopted risk management methodologies report fewer failed ventures and less damage from unforeseen events.
Related Articles of Interest :
-
Risk Management News
10 August 2010 8:30 PM |
No Comments
Risk management is the act or practice of controlling risk. Most businesses re very interested in understanding the ways to control risk. This has created a secondary industry focused on mitigating risk and providing management information that allows business to gain from the knowledge of...
-
Risk Management Software
10 August 2010 8:30 PM |
No Comments
Since the advent of risk management as a specialized function in many organizations, software plays a greater role in the operational health and growth of a company. Software have been developed to minimize business risk, as well as identify opportunities where ‘risk taking’ can accelerate...
-
Risk Management
10 August 2010 8:30 PM |
No Comments
Every business carries an element of risk. Therefore, managing risks is crucial process in many organizations. Depending on the business, steps can be taken to reduce the frequency and intensity of risk. Risk management is a process or group in an organization that takes management...
-
Contract Management Enterprise Software
10 August 2010 8:30 PM |
No Comments
Contract management enterprise software is designed to enhance effective contracting processes. They are particularly useful for companies, which could be termed ‘contract-intensive’ enterprises. Companies the world over has been able to reduce procurement spending and improve their sales graph using this software system. Yet another...
-
What Is Enterprise Asset Management?
10 August 2010 8:30 PM |
No Comments
Every enterprise and business organization thrives for effective strategies in order to maximize the returns on their assets. They do this by reducing operating costs, managing capital expenditures, and improving asset maintenance and utilization. Enterprise asset management solutions provide high-end, integrated, and complete capabilities to...
-
Enterprise Asset Management
10 August 2010 8:30 PM |
No Comments
Asset management involves not only the management of the capital and physical assets of the company, but also the management of its back office system. This, simply put, means effective management of all processes of a set-up—manufacturing, logistics, distribution, inventory, and shipping. It is obvious...
-
Enterprise End-To-End Asset Management
10 August 2010 8:30 PM |
No Comments
The need for fast, secure and cost-effective modes of communication has been increasing. To gain a competitive advantage, the end-to-end feature of communication networks was developed. It enables you to carry out objectives directly to your end-user without the service of an intermediary. Industries such...
-
Enterprise Asset Management Systems
10 August 2010 8:30 PM |
No Comments
Enterprise asset management (EAM) systems are fully integrated and customized to the requirements of businesses. An EAM system has four significant support components: software, business processes, users and operating systems. Software is at the core of EAM systems. It can be tailored to your organization’s...
-
Asset Management Software Online
10 August 2010 8:30 PM |
No Comments
Asset management software applications that are connected to an enterprise wide network or the Internet are referred to as online asset management applications. Connecting these applications to a network offers several benefits. In case of online asset management applications for manufacturing companies, trans-receivers are embedded...
-
Business Process Management
10 August 2010 8:30 PM |
No Comments
Business process management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims. This basic definition needs to be expanded as manager’s carry out the managerial functions of planning, organizing, staffing, leading and controlling. Management...