n this article, Richard Sharman, who heads KPMG's Enterprise Risk Management (ERM) team, considers the key elements of an ERM framework, provides guidance on how business leaders can assess where their organisation is in relation to the concept, and illustrates some methods that can be employed to move their organisations forward.
What is Enterprise Risk Manaqement?
Risk management is rapidly moving up the corporate agenda. Due to a combination of regulatory and other external pressures, such as globalisation, e-business and stakeholder expectations, the pressure is on senior management to make the previously ad hoc and informal risk management process more explicit, and to formally review its effectiveness.
Enterprise Risk Management (ERM) represents the model around which organisations are presently seeking to achieve best practice and utilise risk activity as a driver to enhanced performance. Furthermore, the approach to risk that Enterprise Risk Management promotes is one that is increasingly expected by shareholders, financial markets and wider stakeholder groups.
ERM focuses on proactively managing risk across organisations, encompassing strategic, operational, reputation, regulatory and information risks. Whilst there are differing models and perspectives of how Enterprise Risk Management should be engaged, many agree that it is: