ENTERPRISE RISK MANAGEMENT (ERM) DEFINITIONS ERM provides a framework for management to deal effectively with risk and opportunity, and thereby enhances its capacity to create value. Within the ERM framework, strategy is aligned with risk appetite through a risk-based capital allocation process. Reporting on the sources of risk and the return underpins sound corporate governance by informing the company board about the most significant financial and compliance risks facing the organization and the actions being taken to manage them. ERM can be evaluated in five areas: 1. Risk Management Culture 2. Risk Controls 3. Emerging Risk Management Programs 4. Risk and Economic Capital Models 5. Strategic Risk Management ERM excellence is defined as follows: “A business owner that has effected strong capabilities to consistently identify, measure, and manage risk exposures and losses within the companies ERM pre-determined tolerance guidelines. There is con-sistent evidence of enterprise’s practice of optimizing risk-adjusted returns. That Risk and Risk Management is always an important con-sideration in the business owners corporate decision making. B. “ERM is” a process, effected by an entities board of directors, management and other personnel, applied to strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achieve-ment of entity objectives” as defined by COSO –“ C. “ERM is” a disciplined approach aligning strategy, processes, people, technology and knowledge to manage uncertainties as the enterprise creates value”. Next Page
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