Enterprise Risk Management Tools and Techniques

The Institute of Management Accountants has issued a new document that summarizes tools and techniques used by businesses that have effectively implemented an ERM program.  After identifying risks, businesses should focus on risk drivers and utilizing the vast number of tools currently available for managing risks.  Also, the importance of an enterprise-wide approach should be considered when organizations become trapped into managing risks reactively or by use of the silo method.  This document contains numerous practical tools and templates that can be adapted for a variety of organizational settings.

Download Enterprise Risk Management:  Tools and Techniques for Effective Implementation [Download PDF]

Table of Contents

  • I. Executive Summary . . . . . . . . . . . . . . . . Page 1
  • II. Introduction . . . . . . . . . . . . . . . . . . . . .  Page 1
  • III. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2
  • IV. Risk Identification Techniques . . . . . . . . . Page 3
  • Brainstorming . . . . . . . . . . . . . . . . . . . . . Page 4
  • Event Inventories and Loss Event Data . . . Page 5
  • Interviews and Self-Assessment . . . . . . . . Page 6
  • Facilitated Workshops . . . . . . . . . . . . . . . Page 7
  • SWOT Analysis . . . . . . . . . . . . . . . . . . . . Page 7
  • Risk Questionnaires and Risk Surveys . . . Page 8
  • Scenario Analysis . . . . . . . . . . . . . . . . . . Page 8
  • Using Technology . . . . . . . . . . . . . . . . . . Page 9
  • Other Techniques . . . . . . . . . . . . . . . . . . Page 9
  • V. Analysis of Risk by Drivers . . . . . . . . . . . Page 10
  • VI. Risk Assessment Tools . . . . . . . . . . . . . Page 11
  • Categories . . . . . . . . . . . . . . . . . . . . . . Page 12
  • Qualitative vs. Quantitative . . . . . . . . . . Page 12
  • Risk Rankings . . . . . . . . . . . . . . . . . . . . Page 13
  • Impact and Probability . . . . . . . . . . . . . . Page 13
  • Keys to Risk Maps . . . . . . . . . . . . . . . . Page 14
  • Link to Objectives at Risk or Divisions at Risk . . . . Page 15
  • Residual Risk . . . . . . . . . . . . . . . . . . . . Page 16
  • Validating the Impact and Probability . . . Page 17
  • Gain/Loss Curves . . . . . . . . . . . . . . . . . Page 17
  • Tornado Charts . . . . . . . . . . . . . . . . . . . Page 18
  • Risk-Adjusted Revenues . . . . . . . . . . . . . Page 18
  • A Common Sense Approach to Risk Assessment . . . . Page 19
  • Probabilistic Models . . . . . . . . . . . . . . . Page 19
  • Seemingly Nonquantifiable Risks . . . . . . Page 20
  • VII. Practical Implementation Considerations Page 23
  • ERM Infrastructure . . . . . . . . . . . . . . . . Page 23
  • ERM Maturity Models . . . . . . . . . . . . . . Page 23
  • Staging ERM Adoption for Early Wins . . . Page 24
  • The Role of the Management Accountant Page 25
  • ERM Education and Training . . . . . . . . . Page 25
  • Technology . . . . . . . . . . . . . . . . . . . . . . Page 25
  • Aligning Corporate Culture . . . . . . . . . . . Page 26
  • Building a Case for ERM . . . . . . . . . . . . Page 26
  • The ROI of ERM . . . . . . . . . . . . . . . . . . Page 27
  • X. Conclusion . . . . . . . . . . . . . . . . . . . . . Page 27
  • Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 27
  • Reference List . . . . . . . . . . . . . . . . . . . . . . Page 28
  • Additional Resources . . . . . . . . . . . . . . . . . . . . . . Page 28

Exhibits: Table of Contents

  • Exhibit 1: A Continuous Risk Management Process. . . Page 2
  • Exhibit 2: Industry Portfolio of Risks . . Page 5
  • Exhibit 3A-D: Risk Identification Template Page 6-7
  • Exhibit 4: Influence Diagram . . . . . . . Page 10
  • Exhibit 5: Quantifying Risk: Determine the Drivers . . . . Page 11
  • Exhibit 6: Qualitative and Quantitative Approaches to Risk Assessment . . . . . . . . . . . Page 12
  • Exhibit 7: Risk Map . . . . . . . . . . . . . . Page 13
  • Exhibit 8: Risk Map Model . . . . . . . . . Page 14
  • Exhibit 9: Gain/Loss Probability Curve Page 16
  • Exhibit 10: : Tornado Chart: Earnings Variability by Sample Risks . Page 17
  • Exhibit 11: Actual Revenue vs. Risk-Corrected Revenue . . . . . . . Page 18
  • Exhibit 12: Goals of Risk Management . . . . . . Page 19
  • Exhibit 13: : Earnings at Risk by Risk Factor . . . . . . . . . . . . . . . . Page 20
  • Exhibit 14: Earnings at Risk Hedge Effectiveness Comparisons . . . . Page 21
  • Exhibit 15: Expected Earnings and EaR . . . . . . Page 21
  • Exhibit 16: Probability Assessment of Earnings Outcomes . . . . . . Page 22
  • Exhibit 17: ERM Maturity Model . . . . . . Page 24