Definition

enterprise risk management (ERM)

Enterprise risk management (ERM) is the process of planning, organizing, leading, and controlling the activities of an organization in order to minimize the effects of risk on an organization's capital and earnings. Enterprise risk management includes financial, strategic and operational risks, in addition to risks associated with accidental losses.

In recent years, external factors have fueled a heightened interest by organizations in ERM. Industry and government regulatory bodies, as well as investors, have begun to scrutinize companies' risk-management policies and procedures and in an increasing number of industries, boards of directors are required to review and report on the adequacy of risk-management processes in the organizations they administer.

Organizations can benefit by shifting the corporate culture from one that focuses on meeting IT compliance obligations to one that targets overall risk reduction. Visibility into the overall security of the organization plays an important role in establishing this new dialogue.

Reducing enterprise risk and developing a common risk management language requires an organization to:

Define scope - identify and prioritize critical business processes and their related risks.

Map risk - determine which threats could jeopardize business objectives or critical strategy, share that information and set controls to offset these risks.

Develop an action plan - create a risk treatment plan to identify unacceptable risks and resolve risk gaps.

Automate - use AI technologies to automate inefficient and ineffective manual processes.

Monitor and measure - establish metrics to identify key control deficiencies. Evaluate how the enterprise risk management program is progressing, how it varies from policy and the number of risk incidents.

This was last updated in April 2018

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