Enterprise Risk Management

About Event

1. Why is ERM important?

Why is understanding risk important?

Times change; investors and directors don’t like unexpected events. Which is why regulators are now requiring organizations to determine the risks which might give rise to these events and, in some cases, disclose them.

Certain events which have happened recently and the risk associated :

1. Kodak cameras were number One at one point of time ….new digital technology came and they suddenly went out of business…bankruptcy filed by kodak
2. Nokia at some point was at the Top….android came and Nokia lost the market………….then Blackberry came and now blackberry is nowhere……………..

But it’s not about bureaucracy: an organization that understands its risks, understands its opportunities. However:

• If it doesn’t know its risks, it doesn’t know the risks it can accept
• If it doesn’t know the risks it can accept, it doesn’t know the risks to take
• If it doesn’t know the risks to take, it doesn’t know how to grow
• If it doesn’t know how to grow, it will wither away.

If it does not understand its risks, ‘Events’ will knock the organization back; missed opportunities will hold it back.

So how does any organization control events and seize opportunities? By understanding:

• The risks it faces, both ongoing and in new projects.
• The risks it is prepared to accept.
• The action necessary to manage those risks it is not prepared to accept.

Since the management of the organization is responsible for controlling events and seizing opportunities, they are responsible for specifying objectives and identifying, assessing and managing the risks threatening the achievement of the objectives. The correct operation of these processes is essential if an organization is to achieve its objectives. Stakeholders, including investors and other interested bodies, now expect confirmation that this risk management framework is operating effectively. Just as external auditors provide confirmation concerning the financial accounts, so internal auditors provide this confirmation concerning the risk management framework.