ENTERPRISE RISK MANAGEMENT (ERM) PLANS

The September 2001 terrorist attacks, 2005’s Hurricane Katrina and the global financial crisis of 2008 were huge catalysts for the practice of risk management. Bond rating agency Standard & Poor’s was surprised to learn that none of the insurers which were bankrupted by Katrina were using ERM.

From the events listed above emerged a truth: risk management is not limited to downside risk. ERM can be used to identify and exploit opportunities, such as improving capital allocation or identifying emerging markets. At its fullest ERM will help an organization move its thinking from purely operational to strategic.

ERM minimizes organizational threats and weaknesses, enabling the organization to focus on strengths and opportunities and create competitive advantages. An organization improves its business intelligence through strategic decision-making, by incorporating Enterprise Risk Management and developing a comprehensive picture of key risks; because risks managed separately are not the same as they are when managed together.

Risk management is not a net cost for an organization but an investment with measurable returns.