Enterprise Risk Management (ERM) is the continuous process that integrates and aggregates risk management activities across all areas of risk, within all areas of an organization. It is a structured, standardized approach that aims to continuously identify and manage risk as it relates to overall business strategy and objectives on an enterprise-wide level.
A risk is any activity which creates uncertainty regarding a firm’s ability to achieve its business strategies and objectives. Risk is measured in three metrics: the potential impact of an event, the likelihood of it occurring, and the level of assurance, or confidence in mitigation and control activities in place. While understanding risk is an important element in preventing unwanted outcomes, it is also a necessary step in identifying and capturing opportunities.
A successful enterprise risk management program integrates risk management into corporate culture, work processes, and the organizational structure to ensure that all risks are identified and assessed, and that coordinated plans are in place to ensure an appropriate response to events that maximize potential gains and minimize or avoid potential losses.
Learn how LogicManager’s ERM software safeguards thousands of organizations from harmful pitfalls here!
How do you accomplish this?
A risk governance structure needs to be put in place to collect risk information at the activity level, where most operational risks materialize and to aggregate this information to a level senior management and regulators care about. Roles and responsibilities need to be clearly defined and articulated so there is accountability at all risk levels in the organization. Setting the right tone for an ERM program starts at the top with the board of directors and senior executives. Getting this support and approval for the enterprise risk management program exudes a positive risk culture throughout the rest of the organization. This will lead to better engagement in risk management processes at all levels of the organization.
The more integrated ERM is in everyone’s job descriptions the easier risk assessments will become and the more valuable they will be.
Getting There: ERM Charter
LogicManager’s ERM Charter provides organizations the foundation and framework needed to build an ERM program. Including the assignment of roles and responsibilities, goal setting, process development, and outlining a process for risk identification, assessment and mitigation procedures, the ERM Charter document will give your organization the foundation needed to build a new ERM program from the ground up, or strengthen an existing one.
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