Enterprise Risk Management Frameworks
By applying ERM in conjunction with other operational elements in the current business environment, companies can also accomplish many of their governance-related tasks.
Specifically, ERM can help organizations:
- Identify strategic risk opportunities that, if undertaken, can facilitate achieving organizational goals.
- Provide senior management with the most up-to-date information regarding risk that may be used in the decision-making process.
- Establish co-dependency between the ERM initiative and considerations for capital market reporting disclosures and other laws and regulations.
- Align annual performance goals with risk identification and management.
- Encourage and reward upstream reporting of business-risk opportunities and challenges.
There are various ERM frameworks that a company could potentially follow, all of which should define the essential components, suggest a common language and provide clear guidance for enterprise risk management. In addition, each framework that is implemented should also describe an approach for identifying, analyzing, responding to, and monitoring risks and opportunities facing the enterprise.
Among the more widely known frameworks and/or standard, and the related ERM definitions that they promulgate are:
- COSO ERM Framework
- ISO 31000 Risk Management Standard