Enterprise risk management ERM frameworks

Good ERM frameworks identifies the most important components in field of the enterprise risk management. It also presents key concepts, offers the way of specific ERM language implementation and provides enterprise risk mitigating team with clear instructions of how a risk solution can be found.

Enterprise risk management integrated framework

The choice of the enterprise risk management framework highly affects overall management efficiency, so it’s extremely important to find a framework, which meets your expectations.

Modern market offers a wide range of different frameworks, which are suitable for different companies. However, there are several the most popular frameworks:

• COSO enterprise risk management integrated framework – the most popular ERM framework in the USA.
• ISO 31000 – although COSO is quite popular, ISO 31000 is the only one international ERM standard. Still it’s quite new and as a result it competes with national standards.
• CRISIL framework – new and efficient solution in the field of a wide risk management.

COSO enterprise risk management framework

COSO ERM framework is one of the oldest solutions available on the market. It was released in 2004 and since then it was used by a wide range of different companies.

COSO enterprise risk management framework divides all possible objectives in this field into four main categories:

• Strategic – ambitious and efficient goals, which lead to accomplishing of the organization mission.
• Operations – reasonable use of available resources.
• Reporting – reliable and effective way of providing reports.
• Compliance – respecting laws and exciting regulation rules.

This division helps to properly identify and handle risks and their overall influence on the different internal processes.

The second part of the COSO risk management is components distribution into eight different groups, which are also interrelated:

• Internal environment – this group includes a basic style of risks handling, personal risk management approach and other things connected with the risks image and organizational issues of the risks handling.
• Objective setting – objectives should be set before the actual risk management process as they have a big role in it.
• Event identification – these components help you identify internal and external events that have impact on business process. Events should be divided in two groups – opportunities and risks.
• Risk assessment – risks evaluation. You should identify the type of risk and define possible ways of mitigating, avoiding or benefiting from it.
• Risk response – the actual stage during which you choose a one solution among the whole bunch of them that have been developed by risk assessment.
• Control activities – implementation of risk response into the working process.
• Information and communication – identification of the relevant information. Proper communication throughout the whole COSO enterprise risk management
• Monitoring – control of the mitigation processes and their adjustment in their development if it’s required.

COSO ERM framework is generally based on the tight relationship between objectives and components. This approach permits to make a proper image of the whole risk management process and of its specific impact on different levels of organization processes.

Enterprise wide risk management

Enterprise wide risk management is a highly structured process (framework) that influences the whole enterprise. It’s used for a better identification and mitigation of financial and non-financial risks in different levels. Moreover, it reports on probable opportunities and threats, which might affect company in the future.

Use of the enterprise wide risk management can bring the following benefits:

• Increasing chances of reaching your companies goals
• Structured reports about risks identification and mitigation on the border level
• Better understanding of major risks and as a result increase of handling efficiency
• The cross-business risks identification and sharing
• Higher focus on important things
• Decrease of the crises possibility