Your firm may be covered in the event of theft, fire or flood, but that is not enough in the business world today. A survey of the Fortune 1000 conducted by Mercer Management Consulting found that none of the companies surveyed cited hazard risks as the reason for their losses because, "for the most part, companies have addressed that aspect of risk," says Jim Loucks, senior vice president of business development with Marsh Inc., Mercer’s parent company and an insurance brokerage and risk adviser firm in Houston.
Enterprise Risk Management can be incorporated to deal with financial, operations and strategic risks. Enterprise risk management enables companies to examine all the risks they may face and to measure the impact of these risks in the long-term viability of the company and to incorporate the steps to manage those risks.
ERM can be a compelling tool for a number of reasons. First, the process of identifying, quantifying and prioritizing risks makes them more prominent and real to executives and managers who may not have given risk management significant thought before. Second, a holistic approach to risk management takes the entire concept beyond the traditional parameters of what is insurable.
The article outlines the three stages of risk management such as, "Setting the Stage", "Identifying Risks" and "Managing Risk." Enterprise risk management is varied for each and every company, but there are some common keys outlined below to successful ERM.
- Have a stated goal or desired result.
- Gain senior-level support.
- Prioritize risks.
- Develop a policy.
- Make ERM an ongoing process.
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