Enterprise Risk Management (ERM) is a framework or a process used by organizations to manage their organization-wide risk management activities.
Organizations are surrounded by multiple risks every day. Natural disasters such as earthquakes or cyber-attacks targeting their information assets. These are unwanted events that could occur to any organizations unexpectedly. On the other hand, mishandling of confidential information or errors in quality management, they are caused by mistakes made during routine business activities processes. Moreover, business mergers/acquisition failures, oversea expansion failures, they are often caused by strategy mistakes made by the management of an organization. Financial risks such as currency conversion rate changes and the stock price changes are also considered as risks.
Organizations are managing risks the best way possible to face potential crisis situations. Their management systems are usually operated in accordance with ISO management system standards guidelines such as ISMS and QMS to ensure the effectiveness. Risks are often managed by multiple divisions within an organization such as Legal, Accounting, Compliance, Human resources, General affairs, etc. It is also common to establish specific management committees within an organization for the purpose of risk management such as Information Technology committee or Risk Management committee.
However, adverse effects are often identified with above-mentioned management system structures especially when actions are implemented separately by each management divisions or committees. This could create a possibility of potential risks not being identified by appropriate participants or cause inconsistent risk assessment results reported by several different participants. This could also be a cause of overlap in investment, rework of existing plan, errors in the assessment processes/result, etc. These adverse effects should not be ignored when identified or framework of the risk management itself would lose the substance and eventually hinder employees’ motivation.
