Enterprise risk management covers the ways and procedures used by companies to manage risks, seize opportunities and handle possible problems related to their business goals. Business is always facing a variety of risks, one of which is the threat posed to its financial status. The other kind is the threat posed to its reputation. A business can be at risk for a number of reasons. One is the failure to identify the risks before starting a business. Other is not being able to foresee the risks that might arise during the course of the business. Another is being unable to detect the actual threats that would pose a risk during the course of its operations.
It is imperative to keep an eye on the risks that are actually being faced by the business. The business should also be able to cope up with the risks that might occur during its operations. Enterprise risk management therefore involves both identifying and controlling the risks that could threaten the business’ viability. It also entails controlling the risks that might affect the operations of the business and those that could take away its success. Enterprise risk management aims at ensuring that the risks are taken care of in such a way that they do not impact on the operations of the company.
Another important factor that can affect the company’s capacity to deal with its risks is the level of control exercised over the company by its management. For instance, some companies have a high degree of control over the management of the business whereas others have a very limited degree. An enterprise risk management strategy should therefore include a strategy on the level of control that needs to be exercised by the management. Such an effort should aim at providing adequate control to the management so that it can monitor and identify the risks that could come up.
Management has to work on the problem of identifying and dealing with the problems that are already present and those that would arise in the future. They have to look at the entire business of the company from top to bottom and see what the weaknesses of the business are and what the strengths of the business are. This would include the strategies used in its operations and the strategies that would be adopted in its future business activities. These management efforts must be made with the specific objective of achieving the objectives of the business. The main objective of any enterprise risk management strategy is to ensure that the business can maintain its viability and profitability. However, some of these goals may include the growth and development of the business. Other goals may include reducing costs and improving customer satisfaction levels.
Enterprise risk management focuses more on the prevention of risk than the removal of risk. The prevention of risks refers to the measures that need to be taken to minimize the likelihood of
occurrence of risk. It also involves the planning, preparation and implementation of strategies that are needed to counter the various types of potential risks. Some of these include risk identification and control, the formulation and implementation of strategies for managing risks, and the management of risk in the enterprise.
One of the areas where risks have an effect on the business is through the creation of problems for the business. Some of these problems may come about from external sources and some of them may arise due to internal factors. In certain industries, there may be a need to modify processes to deal with a certain problem. This involves developing new procedures and techniques. However, it is a fact that risk can come from many sources and therefore, there must be appropriate procedures and techniques that are designed and implemented to deal with this problem.