Week 4 Research Paper: ERM Strategy
Prashanthi
SafeAssignOriginalityReport.htm12065.202110 - Fall 2020 - Enterprise Risk Management (ITS-835-M52) - Full Term
Week 4 Research Paper: ERM Strategy
Jeyashree Jeyabalanon Sun, Sep 20 2020, 3:44 PM 30% highest match Submission ID: 968fa193-d6a8-4e20-9ae7-bb99a8a73904Attachments (1)
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ERM-Research paper.docx
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Word Count: 1,303
Attachment ID: 3428306419
ERM-Research paper.docx
ERM AS STRATEGY 1 ERM AS STRATEGY 4 1 ERM as Strategy Jeyashree Jeyabalan 2 University of the Cumberlands 3 09/20/2020 1 ERM as strategy 4 Enterprise risk management (ERM) refers to a business strategy that is based on plans and aims at identifying, assessing, and preparing for any potential hazards, dangers, and other types of figurative and physical disasters that may interfere with the objectives and operations of an organization when they occur. This discipline calls for organizations and corporations to identify all types of risks that they face and to make decisions on the kind of threat to manage actively (Bromiley et al., 2015). 5 It also involves creating an action plan available to all potential investors, shareholders, and stakeholders, treated as part of their yearly reports. Enterprise risk management is a strategy used by many industries, such as international development, finance, insurance, energy, and public health. For many years, organizations have tried to manage risk, mostly by buying insurance; thus, the property has been insured against loss due to fire, natural disasters, or theft. Also, liability insurance and malpractice insured had been put in place to deal with damage claims, injury, or any loss. The ERM is an essential strategy as it entails business risk, which means the various obstacles associated with expansion in terms of financing and costs, company supply chains, and technology. 6 Therefore, enterprise risk management should be used by organizations as a strategy. 7 The Enterprise Risk Management framework was last updated in 2017 by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. COSO recognized the importance and essence of aligning ERM to the performance and strategy of the organization. This is due to the update of the framework, which comprehensively discussed the various aspects that organizations could follow to connect the risk management to performance and strategy (COSO, 2017). Also, it examined what is expected of the ERM programs by the board. Many organizations are challenged by many business disruptions such as regulatory uncertainty, changes in consumer tastes and preferences, and technology innovation. These challenges threaten the ability of an organization to compete effectively with other competitors in the market. Therefore, using ERM as a strategy can assist executives in anticipating and addressing the challenges while simultaneously making choices about the risk-enabling plan, drive value, and build resilience. 8 The ERM framework emphasizes the connections between value, strategy, and risk. This provides a lens that helps evaluate the method that risks informs strategic decisions, thus affecting performance. Moreover, using ERM as a strategy helps elevate the risk role in conversation of leadership on the organization's future. In many instances, the implementation of the ERM framework is problematic for many organizations. Some are experiencing hard times while trying to demonstrate ERM value, and end up investing enough resources to cater for a substantial risk capability. In other organizations, it is challenging to integrate the management of risk across a given organization, which embed the organization into business processes, functions, and units (Oliva, 2016). Some organizations do not build a culture that creates risk awareness, which should always be embraced and governed by the senior leadership using a firm tone. In such cases, the ERM, when used as a strategy, would efficiently work since it requires few requirements. The framework is capable of escalating the risks to the right people, which drive meaningful risk conversation with other leaders aiming at informing decision-making. A proper working ERM increases the effectiveness and efficiency of resources in managing the core risks to an organization. At the same time, simultaneously protect an organization's reputation and reducing the crisis events' impact. Also, the framework support objectives and strategic goals achievements, depending on leadership determination. Organizations can use ERM as a strategy, by using it for defense and offense, to enhance and protect value. In many cases, implementing ERM improves the desired performance of an organization and success chances in achieving the strategy. Also, ERM enables leaders to take risks in opportunities pursuit, resulting in significant rewards (COSO, 2017). Organizations, therefore, require to be confident enough in their ability to identify, strategically think, and analyze the risks to the strategic decisions on an ongoing basis. Also, confidence helps in monitoring, correcting, and responding positively to the course of the unforeseen event. Moreover, The ERM approach is, in most cases, targeted to focus on risks that may threaten the achievement of strategy and long term goals and objectives of a business. As a strategy, it can work as a tool for managing compliance, financial, and strategic risks. This helps in maximizing the instinct value of a firm while minimizes unexpected variance in performance. It is an essential strategy in making informed risk decisions, managing risks, monitoring, and reporting them. By doing so, they assist an organization to be ahead of the competition. Organizations can use ERM as a strategy in supporting the board's risk oversight role. This can be achieved by providing specific insights into risks to the strategy of an organization, hence supporting the decision-making processes of leadership on any ongoing organizational process. Although boards require more transparency, many do not necessarily receive the reporting and updates of risks they are need of. Many executives and boards end up lacking confidence in ERM programs' robustness (Bromiley et al., 2015). The question of the ability of the programs to allow them to guide and oversee the organization's strategic decisions. In any environment, these programs identify the right risks at the actual time. For effectiveness, reporting risks to the board should always include the efficacy of risks while addressing it through valid, measurable, and impactful tracking metrics. As a strategy, the ERM program can be used in determining the best way of risk mitigation and managing the various risks. In some instances, institutions depend on programs to get an overview of the organization's risk in the overall company. However, it is always essential to take full risk management processes overview since it is a better understanding of upper management on threats and risks to an organization (Oliva, 2016). By doing so, institutions can easily understand the nature and kind of risk and develop ways of reducing them. Moreover, ERM can be used as a strategy by initiating risk management programs that assist in the decision-making process. Also, through the framework, other initiatives are quickly introduced in other areas, which helps organizations in showing the value of integrating risks and the advantages it brings in the process of decision making. In conclusion, the global business environment is rapidly changing, simultaneously increasing the complexity and volume of risks affecting a given enterprise. Developing ERM as a strategy helps an organization in avoiding its operations from being interfered with. This is due to the ability of ERM to address numerous issues, such as frameworks, protocols, and principles. At the same time, reactively and proactively manage all risks that affect the overall strategic success of the organization. For a comprehensive ERM framework, there is a need to incorporate strategic risk management and strategic planning. They respond to strategic risks to the models of business. Also, it is vital to have a disciplined process to assess, identify, and deal with strategic risks. 9 Undoubtedly, risk management is an essential element in strategic management, and every organization should embed it in all of its ongoing activities. Assessing significant risks and implementing suitable risk responses are some of the fundamental elements of the ERM framework. References 10 Bromiley, P., McShane, M., Nair, A., & Rustambekov, E. (2015). 11 Enterprise risk management: 10 Review, critique, and research directions. Long-range planning, 48(4), 265-276. 12 Committee of Sponsoring Organizations of the Treadway Commission. (, 2017). 11 Enterprise Risk Management: 1 Integrated with Strategy and Performance. Association of International Certified Professional Accountants. Oliva, F. L. (2016). 10 A maturity model for enterprise risk management. International Journal of Production Economics, 173, 66-79.
Citations (12/12)
- 1 Another student's paper
- 2 Another student's paper
- 3 https://www.coso.org/Pages/default.aspx
- 4 Another student's paper
- 5 Another student's paper
- 6 https://www.wipfli.com/-/media/wipfli/article-files/cons-erm-retooled-whitepaper.pdf
- 7 Another user's paper
- 8 https://www2.deloitte.com/lk/en/pages/risk/articles/coso-erm-update.html
- 9 Another user's paper
- 10 Another student's paper
- 11 https://en.wikipedia.org/wiki?curid=1993537
- 12 https://en.wikipedia.org/wiki?curid=2360715
