Enterprise risk management (ERM) is a holistic approach to understanding and managing risk throughout an organization. Almost any business, but especially those that have the potential for large losses, can benefit from ERM.
The terminology — enterprise risk management — is designed to emphasize the need for a coordinated effort to address all types of risks. Essentially, all of a company’s risks fall into one or more categories:
These risks can and often overlap. For example, damage to a company's brand caused by negative publicity — part of strategic risk — can result in a drop in sales, a financial risk.
There are risks that may be specific to a particular organization, such as environmental risk at a chemical plant. In addition, there is the risk that future legislation could affect how an organization provides products and services. Viewing these risks through a coordinated effort allows an organization to identify risks from a big picture perspective and develop more efficient responses.
Two potential obstacles to an effective ERM program are:
Certainly every department should be involved in the risk assessment and solicited for recommendations. The other key is having a method for constant communication that flows both up and down the organization.
Finally, setting up an ERM program doesn't have to be expensive. You can optimize your risk management dollars by employing a consultant through the company brokering your insurance.
To learn more about enterprise risk management, contact us.
Rebecca advises employers on leave policies, accommodations, discrimination and early intervention with workers’ compensation claims. While in private practice, she focused on defending workers’ compensation claims and handling Medicare-related issues arising from those claims. Rebecca received her
Rebecca advises employers on leave policies, accommodations, discrimination and early intervention with workers’ compensation claims. While in private practice, she focused on defending workers’ compensation claims and handling Medicare-related issues arising from those claims. Rebecca received her Bachelor of Business Administration degree with a major in human resource management from the University of Wisconsin-Eau Claire and received her law degree from Marquette University Law School.
Enterprise risk management (ERM) is a holistic approach to understanding and managing risk throughout an organization.
To develop an effective ERM program, organizations must first identify their risks, assess their current situation and come up with solutions. Those solutions must then be integrated throughout the organization, because controlling risks in one department won't protect the business if another area is vulnerable.
There are four basic categories into which business risks can fall, and there are four basic responses available to businesses depending on the category a given risk is placed. In the end, confidently choosing to retain or transfer a risk should help you sleep better at night.
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