Enterprise Risk Management Essay Sample

Enterprise risk management has always been an important part of running a business. Moreover,   this is an important topic to understand so that one can successfully apply it to their business and obtain the benefits. Therefore, enterprise risk management will be our topic of discussion in this sample essay.

Furthermore, we will be looking at all the important concepts related to the topic. This essay sample will include the following: What is Enterprise Risk Management? What is difference between the Enterprise Risk Management and Enterprise Resource planning? Types of ERM, Enterprise Risk Management Framework, and Benefits of Enterprise Risk Management.

What is Enterprise Risk Management?

Enterprise risk management is a planning-based business strategy. Adding to this, the main goal of this strategy is identification, assessment, and preparation for potential risks, as implied by the name. Moreover, the term “risk” based on the nature of the organization, refers to physical or figurative dangers that may disturb their operations.

What is difference between the Enterprise Risk Management and Enterprise Resource planning?

As we discussed above the enterprise risk management concerns itself with the study of various data to identify, assess and mitigate. On the other hand, ERP or enterprise resource planning uses the information gained from ERM analysis and applies it to the business. In simple words, we can say that the ERP applies useful information from ERM for the best outcome possible.

Types of Enterprise Risk Management

Enterprise risk management is divided into several parts for the sake of ease of management. Apart from that, it helps better performance. Nevertheless, we shall see the different types of ERM, which are as mentioned below:

• Risks to health and safety
• The risk to the reputation
• Operational risk
• Strategy related risk
• Compliance risk
• Finance related risk

Enterprise Risk Management Framework

Enterprise risk management framework provides a system for risk management which includes identification of potential events (risks and opportunities), assessing them with respect to their effect, magnitude, and such factors, and finally determining and developing a strategy to deal with the risks.

Moreover, there are three stages of ERM involved in the process. These three areas mentioned below:

• Identification
• Assessment
• Solution

Moving on, we will be discussing these three in brief below:

Identification

Identifying the risk is the first step of risk management. As to deal with a problem one must be aware of the problem itself. Moving on, in these stages potential risks are identified and divided into categories.  Namely’ trigger and consequence. As the name suggests trigger refers to the adverse events and consequences are the aftermath of it.

Assessment

The second step of risk management includes assessing the risk. Does this mean asking questions like how dangerous is the risk? What are the problems created by it? In simple words in this step one assesses the magnitude and potential of loss that may be caused through that risk.

Solution

The third and final step of risk management is looking for a solution. Adding to that, one determines if that risk is avoidable if not can the organization afford that risk, and so on.

Benefits of Enterprise Risk Management

In this section of the sample essay, we shall discuss the benefits or advantages provided by risk management. These benefits are as mentioned below:

• ERM provides greater awareness of potential risks and enables the organization to face them effectively
• Higher confidence of achieving strategic objectives of the organization
• More compliant with legal, regulatory as well as reporting requirements
• improved efficiency and effective operation

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