Enterprise Risk Management

Written by Yvette Dubel
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There has been an economic shift towards service-driven and globally-oriented businesses. The rise of enterprise risk management is evidence of where potentially unforeseen risk hides. Many businesses are starting to invest in an enterprise risk management process because of the need for standardization across an organization.

Businesses face multiple risks on many fronts--corporate governance, technological dependence, currency fluctuations, human resources abroad, and disappearing distribution channels are but a few. Companies can transition towards deeper integration with regard to implementation. However, that will require staying the course with proactive approaches to risk management.

Since 2002, it appears that enterprise risk management has become the driving force when implementing financial controls. The reasons have been partly driven by operational management, but even more so by public relations demands. Avoiding corporate scandal requires that such controls be utilized and reviewed.

Assessing Requirements

In order for a standardization of enterprise risk management to work, it must be based on reliable framework. This framework should facilitate the assessment procedure. While on the one hand it helps define the process, it must also provide sound evidence for effective improvements.

The starting point of a successful assessment is establishing the objectives and then clarifying them. For starters, enterprise risk management should help identify the risk. These risks need to be evaluated and prioritized according to material significance and threat potential.

Key elements of the objectives for enterprise risk management include developing a risk strategy. How will it be communicated and implemented throughout the organization? The role of each department needs to be determined in terms of meeting the strategy goals. How has risk been defined and ranked? Has the present approach to risk management been effective? How will risks be monitored in the future? Based on these questions, enterprise risk management solutions can be refined to ensure maximum value is delivered.

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