Relevance of Enterprise Risk Management 1

8/2/2019 Relevance of Enterprise Risk Management 1

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RELEVANCE OF ENTERPRISE

RISK MANAGEMENT

BIIB

Presented by : DEVANSH JANIRoll No. 17


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INTRODUCTION

1.1 An enterprise exists to fulfill its established purposes for its stakeholders, by

taking on projects and interacting with external and internal clients. In the processof selecting and implementing projects, the enterprise must interact with various

players in its operating environment, deal with organizational issues, anticipate and

respond to changes in its operating environment and face unknown factors and

uncertain outcomes to avoid a crisis.

A crisis:

occur quite suddenly, sometimes with no warning;

invite outside scrutiny (media, government);

generate nasty headlines with lasting effects;


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damage enterprise and individual reputations;

directly affect top and bottom lines of the business;

cause upheaval in the senior management ranks;

damage relations with employees, investors, analysts, regulators,suppliers, and customers;

is unpredictable but more often, quite predictable (and evenavoidable); and

take years to fully recover from.


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Definitions for Enterprise Risk

Management (ERM)

Process by which organizations in all industries,assess, control, exploit, finance and monitor

risks from all sources for the purpose ofincreasing the organizations short and long

term value to its stakeholders.


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TYPES OF RISKS

Hazard risks are those risks that have traditionally been addressed byinsurers, including fire, theft, windstorm, liability, business interruption, pollution,health and pensions.

- Financial risks cover potential losses due to changes in financialmarkets, including interest rates, foreign exchange rates, commodityprices, liquidity risks and credit risk.

- Operational risks cover a wide variety of situations, includingcustomer satisfaction, product development, product failure, trademarkprotection, corporate leadership, information technology, management fraud andinformation risk.

- Strategicrisks include such factors as project completion, customerpreferences, technological innovation and regulatory or political impediments.

Although there can be disagreement over which category would apply to a specific


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FUNCTIONS Identify risks in all areas at once

Consider how risks can affect more than one area,

Use consistent measures so that different risks anddifferent operations can be compared

Use these measures in decision making as each riskfunction varies in capability and how it coordinates withother risk functions

Thus, the central goal and challenge of ERM is improving thiscapability and coordination, while integrating the output toprovide a unified picture of risk for stakeholders andimproving the organization's ability to manage the riskseffectively.


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Enterprise Risk Management

Framework ERM provides a framework for risk management,

which typically involves identifying particularevents or circumstances relevant to theorganization's objectives (risks andopportunities), assessing them in terms of

likelihood and magnitude of impact, determininga response strategy, and monitoring progress.

Enterprise risk management is not strictly a serialprocess, where one component affects only thenext. It is a multidirectional, iterative process inwhich almost any component can and does

influence another.


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Model of Enterprise Risk Management Process

Monitoring ,Control ,Activities

Information & Communication

Risk Response Risk Assessment Event

Identification Object Setting Internal Environment

/


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4.Components / Structure of

Enterprise Risk Management

Aligns risk appetite and corporate strategy

Enhances / improves risk response decisions

Reduces operational surprises and losses

Identifies and manages enterprise wise risks

Recognizes and acts upon opportunities.

Deploys responses effectively.


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5. IMPLEMENTATION OF ERM Implementing Enterprise Risk Management in an

organization requires the following steps:

Establish clear roles and responsibilities

Establish organizational and functional riskgovernance structure

Identify a risk champion

Involve all key business managers in the ERMprogram.


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Conclusion

ERMis not truly a new form of riskmanagement; it is simply recognition that risk

management means total risk management, not some

subset of risks. The new focus on the concept of

enterprise risk management provides an opportunity

for risk managers to apply their well established and

successful approaches to risk on a broader and morevital scale than previously. This is an excellent

opportunity to advance the science of risk

management.


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Relevance of Enterprise Risk Management 1