Overview of S&P Proposed ERM Evaluation

Enterprise Risk Management (ERM) is a structured approach to identifying and addressing risks that could hinder the achievement of strategic objectives or create opportunities for competitive advantage. As a critical component of strategic management, ERM integrates risk assessment and response strategies, including risk acceptance, avoidance, transfer, and mitigation, into an organization’s ongoing operations. Widely recognized frameworks such as COSO’s “ERM – Integrated Framework” and IRM’s “A Structured Approach to ERM” guide its implementation.

ERM emphasizes key governance elements like risk philosophy, culture, and appetite, which define an organization’s attitude toward and tolerance for risk. Management responsibilities include establishing a robust risk architecture, creating documented protocols, training personnel, and monitoring and reporting on risk management activities. Benefits of ERM include increased awareness of risks, improved strategic confidence, better regulatory compliance, and greater operational efficiency.

Successful ERM implementation involves understanding the key drivers of business strategy and assessing internal and external risks that could disrupt those drivers. Organizations must ensure systems and processes are in place to manage these risks effectively.

Original Article Source: “Enterprise Risk Management,” AICPA & CIMA