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Enterprise risk management Essay

Effected by people at every level of an organization ;Applied in strategy setting ;Applied across the enterprise, at every level and unit and includes taking an entity’s portfolio view of risk ;Designed to identify potential events that If they occur will affect the entity and to manage risk wealth Its risk appetite ;Able to provide reasonable management and board of directors ;Geared to achievement of objectives in one or more separate but overlapping categories ;A Enterprise risk process the risks a business entity faces in he course of carrying out its business activities. Such risks would include : 2. 3. 4. Hazard risk Financial risk Operational risk Strategic risk The ERM approach is a first attempt to recognize the interdependencies among risks and the treatment of risks across all business operations. ERM frameworks can be adapted to fit the specifics of the organization’s culture and can be implemented in large or small organizations, service or manufacturing businesses, profit, nonprofit, or private entities. WHY IMPLEMENT ERM? In order to provide reasonable assurance to an entities management board and also hat the business objectives are achieved.

We implement because we want to: Reduce unacceptable performance variability 0 Built confidence of investment community and

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shareholders 0 Enhance corporate governance 0 Successfully respond to a changing business environment 0 Align strategy and corporate culture We also implement ERM because it assists management with: 0 Aligning risk appetite and strategy 0 Enhancing risk response decisions 0 Reducing operational surprises and losses 0 Identifying and managing cross-enterprise risks 0 Providing integrated responses to multi-risks Seizing opportunities and improving deployment of capital Organizational Context Effective ERM implementation requires organizational context that includes: 0 Tone at the top By the board of directors and top management “What are the company’s top risks? ” “How much time do we have “How are we managing them? ” Risk management philosophy and risk appetite Risk philosophy as a control over acceptable risks in order to pursue growth opportunities Risk appetite influences culture, strategy, decisions, and operating style. Individual risk tolerances combined should fall within the overall risk appetite Integrity and ethical values Commitment to integrity , ethical behavior and setting an example for acceptable behavior Reputation risk must be managed proactively.

Under SOX the SEC has directed rules about adopting a code of ethics or explain why it does not. Scope of infrastructure for ERM Scope of the effort should be stated clearly A decision made on risk infrastructure from a governance and leadership accountability perspective C-level support and enterprise-wide educational effort on ERM methodology ass’s ass’s ERM Financial Market Strategy Hazard Operation al A long time ago organizations have reactive various parts to what is now called ERM. Management has always been identifying and proportioning risks. What has now changed is that the vast variety of risks are taken into a holistic manner and evaluating risk management to senior responsibility.

The evolution toward ERM can be characterized by a number of driving forces like: More and more complicated risks External pressures Portfolio point of view Boundary less benchmarking Risk as opportunity Evolution of ERM BUSINESS RISK MANAGEMENT A continuous process and an element of corporate governance. It promotes efficient and effective assessment of risk, increases risk awareness and improves the management of risk throughout an organization. This includes anticipating and avoiding threats and losses as well as identifying and realizing opportunities.

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