Enterprise risk management (ERM)
Enterprise risk management (ERM) is the modern way of looking at risk management and internal control. According to COSO (2004), ERM is a process adopted by the management, board of directors and other personnel and is used in strategy setting and all the enterprise activities to identify prospective events that may influence the business and manage risk, and therefore provide enough assurance that the entity's objectives will be achieved. ERM enables the firm to maintain a collection of risks in an integrated, firm-wide fashion as opposed to the traditional risk management approach that separated risk categories and controlled in risk "silos".
In the rise of the globalization of business competition, most firms are trying to surpass each other for supremacy in the market. The environment, resulting in the market turmoil, has resulted in the need to consider the importance of enterprise risk management (Fong, 2006). The fall of top companies such as WorldCom, Enron and Parmalat raised concerns among managers on the efficiency of company's management. Controls and risk management emerged as fundamental issues (Nocco & Stulz 2006, p.14). The practice is offered to give the most thorough way of dealing with business risk. It provides a framework for managing business risk in a holistic manner as opposed to the conventional method of managing risk in 'silos'. According to the ERM proponents, the implementation of the practice would enhance the firm's value and performance.
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[...] Enterprise Management. Burlington, Elsevier. http://public.eblib.com/choice/publicfullrecord.aspx?p=535056. Chapman, R. J. (2011). Simple Tools and Techniques for Enterprise Risk Management. New York, John Wiley & Sons. http://public.eblib.com/choice/publicfullrecord.aspx?p=822601. Chorafas, D. N. (2004). Operational risk control with Basel II basic principles and capital requirements. Amsterdam, Elsevier Butterworth- Heinemann. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk& db=nlabk&AN=104699. Collier, P. [...]
[...] (2009). Identifying and managing project risk essential tools for failure-proofing your project. New York, AMACON. http://public.eblib.com/choice/publicfullrecord.aspx?p=420626. Lam, J. (2003). Enterprise risk management: from incentives to controls. New York, John Wiley and Sons Ltd. Louisot, J.-P., & Ketcham, C. H. (2014). ERM - Enterprise Risk Management Issues and Cases. Hoboken, Wiley. http://public.eblib.com/choice/publicfullrecord.aspx?p=1656358. Nocco, B. W., & Stulz, R. [...]
[...] Shenkir, W. G., & Walker, P. L. (2007). Enterprise risk management. Arlington, VA, Tax Management. http://taxandaccounting.bna.com/btac/display/link_res.adp?lt=email&fnam e=apps_5303&split=1. Skipper, H. D., & Kwon, W. J. (2007). Risk management and insurance: perspectives in a global economy. Malden, MA, Blackwell Pub. Smart, A., & Creelman, J. (2013). Risk-Based Performance Management Integrating Strategy and Risk Management. [...]
[...] The information enables the clients to assess the firm's risk profile and commitment to better risk management practices easily. The outsiders could otherwise have found evaluating the profitability and risk profiles of companies with high operational and financial complexity very tasking (D'addario, 2013). Therefore, as the company improves on risk management disclosure, the strategy will cut down the anticipated costs of external capital and regulatory scrutiny. The ERM strategy enables managers, in the rise of market strains and new regulatory era, to prove that they are achieving the risk oversight potential for their business function. [...]
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