As businesses grow in size, they have to accommodate more and more people and processes. This inevitably results in more and more interaction with a host of sources, such as regulatory bodies, government, investors and so on. Internally too, companies need to be in the knowhow of how to get their employees aligned with these matters. Managing all these is what Enterprise Risk Management is, in a nutshell.
As companies put in place practices and processes, Enterprise Risk Management takes an important role because the people at the top have to continually create and adhere to risk-management policies and procedures. They and other staff have to assess the adequacy and effectiveness of these policies and procedures. Enterprise Risk Management is thus a function that concerns a number of important people in the organization.
How do we get an understanding of Enterprise Risk Management?
So, how do we define Enterprise Risk Management? Although it is difficult to come up with a single definition; Enterprise Risk Management may be thought of as including the planning, organizing, leading, and controlling of the activities of an organization, all of which is done with the intention of eliminating, or at least minimizing the effects of risk on an organization’s capital and earnings.
It has to be borne in mind that the organization faces several risks apart from only the financial. Enterprise Risk Management’s expanded and comprehensive role should also cover risks that come about as a result of unanticipated losses, as well as strategic, operational, and other risks.
Need for professionals
Many organizations, given the enormous and vast scope of Enterprise Risk Management; hire professionals who address the issues relating to it. Today, we have professionals that specialize in Enterprise Risk Management, just like there are finance and marketing professionals. These Enterprise Risk Management professionals assess and address Enterprise Risk Management issues, minimizing them and keeping the organization in good health.