Enterprise Risk Management

Ann Rodriguez and Viney Chadha

This chapter will define enterprise risk management (ERM) and the value proposition for ERM as an umbrella function, one that takes a fully integrated approach to aggregate information and provide a balanced basis for business decisions. The backdrop for why ERM has become more important than ever before will also be explored.

WHAT IS ENTERPRISE RISK MANAGEMENT?

According to the Committee of Sponsoring Organizations of the Treadway Commission (COSO), ERM is a process, influenced by an entity’s board of directors, management and other personnel, applied in a strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within the risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.

Enterprise risk management is relevant to all companies across all industry types. The implementation of an ERM framework must scale to reflect the size, scope, unique risk profile, and unique stakeholder interest for each entity. The objectives of enterprise risk management – to take prudent risks within the established risk appetite, and to be proactive in the identification and