The Importance Of Enterprise Risk Management

1659 Words7 Pages
defenition It is a process which is on going and flowing through an entity and is affected by people at every level of an organization , it includes taking an entity level portfolio view of risk , also it is designed to identify potential events that if they occur they will affect the entity’s portfolio ,in addition to this they were applied to provide reasonable assurance to an entity’s management and board of directors. Enterprise risk management focus on achieving the organization’s objective ,it also captures for how companies and other organizations manage risk providing types and ways of risks and as for ERM to achieve the organization goal or objective there must be those 4 categories which are strategic where ERM support the organization’s…show more content…
Effective communication also occurs in a broader sense, flowing down, across, and up the entity • Monitoring : The entirety of enterprise risk management is monitored and modifications made as necessary. Monitoring is accomplished through ongoing management activities, separate evaluations, or both Determining whether an entity’s enterprise risk management is “effective” is a judgment resulting from an assessment of whether the eight components are present and functioning effectively. Thus, the components are also criteria for effective enterprise risk management. For the components to be present and functioning properly there can be no material weaknesses, and risk needs to have been brought within the entity’s risk appetite. When enterprise risk management is determined to be effective in each of the four categories of objectives, respectively, the board of directors and management have reasonable assurance that they understand the extent to which the entity’s strategic and operations objectives are being achieved, and that the entity’s reporting is reliable and applicable laws and regulations are being complied with. The eight components will not function identically in every entity. Application in small and mid-size entities, for example, may be less formal and less structured. Nonetheless, small…show more content…
It is the process whereby organizations methodically address the risks attached to their activities. A successful risk management initiative should be proportionate to the level of risk in the organization, aligned with other corporate activities, comprehensive in its scope, embedded into routine activities and dynamic by being responsive to changing circumstances. The focus of risk management is the assessment of significant risks and the implementation of suitable risk responses. The objective is to achieve maximum sustainable value from all the activities of the organization. Risk management enhances the understanding of the potential upside and downside of the factors that can affect an organization. It increases the probability of success and reduces both the probability of failure and the level of uncertainty associated with achieving the objectives of the

More about The Importance Of Enterprise Risk Management

Open Document