The Enterprise Risk Management Framework

Ann Rodriguez and Viney Chadha

In this chapter, we will focus on the basics of an enterprise risk management framework and programme, and describe how a strong, well-implemented KRI programme is critical to the success of enterprise risk management. This chapter will describe the interactions of KRIs with all of the processes within ERM forming an integrated risk management function, and also broadly cover the role of KRIs in monitoring risk.

WHAT’S IN THE ERM FRAMEWORK?

The ERM framework provides a structure for the governance, data, tools and processes that an organisation can utilise to establish a risk appetite, identify, assess and manage risks, and monitor changes that could impact the risk profile ongoing, and to escalate risks in a timely and appropriate manner.

Built on a foundation of a strong risk culture and accurate, complete data, an organisation has some capacity for risk-taking (risk capacity). This could be the amount of capital available for deployment or investment. Along with this capacity for risk-taking, there must also be some boundaries that support how the business achieves its objectives (risk appetite/risk tolerance), a way of describing those business objectives (strategic