reflection

Running head: ENTERPRISE RISK MANAGEMENT 1

ENTERPRISE RISK MANAGEMENT 2

Enterprise risk management

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Enterprise risk management is important for most businesses to grow in the market. Take a good example of the industry that requires a proper risk management plan is the insurance industry, it is important for the those in the insurance industry to do a proper risk management in order to be able to see if they sell certain policies to the larger market will they make profit? Is there a chance of having more claims than what can be able to sustain their business because at the end of the day what really matters is the profitability of the business otherwise it should be brought down?

If we are to consider the sales at the stock exchange where there is normally a rise and fall of prices of the market shares every now and then, this in itself is an area which requires proper risk management so as to make an informed decision on what shares should be bought and which ones not to be bought. Without proper analysis of the risk involved and the chances of recovery from it with a big positive margin then it becomes useless to invest in such an area. Entrepreneurs in as much as they are business people who are the greatest risk takers need to have a certain surety of the extent to which their risk is to be done.

In the insurance industry there is a tendency of passing on risk so the next person bears the burden for you. While people insure their lives and property and their future with insurance companies, the insurance companies themselves are into the habit of reinsuring themselves with re-insurance companies, this is a great way of spreading the risk so that everyone bears the risk of the other. This gives the entrepreneurs a sense of belonging and also grows their confidence to want to grow their business and themselves as well.

Enterprise risk management also enables the executive team in any firm that is in charge of policy making and decision-making duties for the firm. It offers them with a platform to be able to gauge the do and don’ts in the firm and what activities to avoid for the furtherance of the business. All managers must ensure that they protect the credit rating =s of their firms to avoid a case scenario where it will be declared bankrupt. This kind of framework ensures that the firm is protected in that it has a good record with its creditors incase it might require extra resources to keep running its operations.

There are challenges that crop up with implementing the risk management programs and requires a lot of expertise from well experienced persons in the industry, they will tell what risk are worth undertaking and which ones are not. Those which are not are the ones that lead to the collapse of the business.