Enterprise Risk Management
Enterprise risk management (ERM) is a methodology that looks at risk management strategically from the perspective of the entire firm or organization. It is a top-down strategy that aims to identify, assess, and prepare for potential losses, dangers, hazards, and other potentials for harm that may interfere with an organization's operations and objectives and/or lead to losses.
Features and Benefits
ERM sets the organizational-wide expectations around a company's culture. This includes communicating more openly about the risks a company faces and how to mitigate them. This leads to less unexpected risks and more guided direction on how to respond to certain events. In addition, this may lead to greater employee satisfaction knowing plans are in place to protect company resources as well as greater customer service knowing how to respond to customers should certain risks actually occur.
ERM practices are often synthesized by a standardized risk report delivered to upper management. This report succinctly summaries the risks a company faces, the actions being taken, and information needed for decision-making. As a result, a company may be more efficient with its time, especially considering what is delivered to upper management.