Getting Started with a Risk Management Program
Every year companies look at their list of things that they plan to do “someday” and decide that this is the year to tackle implementing Enterprise Risk Management (ERM).
But many of them fail to get very far with that goal.
They start out with hopes to build an ERM program but never see the light at the end of the ERM tunnel. They never get to the point of having a valuable process.
WillisWire has featured five ERM posts in 2014 that, if followed, can lead to a tangible and useful first level ERM process. There are two primary objectives of ERM:
- To make sure that the company has a consistent level of risk management for all of the major risks of the organization.
- To use the information from the processes that are built up to accomplish the above to make strategic decisions about the risk profile that enhance the ability to achieve its objectives.
The terms “risk” and “risk management” are commonly viewed through a lens of avoiding “bad” things happening and limiting the downside. Whilst understandable, the more enlightened view emerging is one of connecting risk to value maintenance and creation. This includes, for example, the empowerment of people to exploit opportunities. Indeed, market watchers view the ability to anticipate and react to a market opportunity to be as important as readiness for a potentially significant business disruption.Moreover, the importance of the risk management culture is naturally being linked with effective ERM practices.
The five risk management practices are needed to create a complete risk control cycle (the first ERM objective above) for all of the major risks of the firm.
- Risk Identification
- Risk Measurement
- Risk Limits and Controlling
- Risk Organization
- Risk Policies and Standards
RISKVIEWS has posted a number of times on ERM Systems. Several times there have been classes for ERM beginners, in Seoul, South Korea; Nairobi, Kenya; Almaty, Kazakhstan; Mexico City, Mexico and Lausane, Switzerland. See Introduction to ERM where slide decks and suggested readings are posted.
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