Enterprise Risk Management Essay

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Enterprise Risk Management David W. Reeves Liberty University Abstract Enterprise Risk Management (ERM) framework is put in place by a company’s board of directors, management, and other personnel to ascertain events that may affect the company, and manage that risk within the company’s accepted risk levels to provide reasonable assurance of achievement of company objectives (Gelinas, Dull, and Wheeler, 2012). Risk and the ERM Framework Managing risk has always been an important aspect of any organization. Risk comes in many different shapes and sizes. From the local neighborhood grocer to the large multi-national corporation, businesses always manage risk in some form or fashion. The old style of risk management comprised of purchasing insurance to protect against unforeseen events (McDonald, 2012). Many companies are “doing the old traditional approach—transferring of risk by [purchasing] insurance” (Slater, 2008, para. 10). This form of risk management was a retroactive approach that sometimes caused companies to suffer collateral damage outside the scope of insurance. ERM is a proactive approach that seeks to identify and manage potential risk, thus minimizing collateral damage that usually falls outside the scope of insurance. “All entities face uncertainty and the challenge for management is to determine how much uncertainty to accept as it strives to grow stakeholder value” (PricewaterhouseCoopers, 2004). Risk management is more than identifying and managing risk. ERM allows organizations the opportunity to effectively and efficiently manage resources to optimize the balance between growth and related risks (PricewaterhouseCoopers, 2004). The ERM framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) helps managers of organizations “identify, assess, and manage risk” (Gelinas, et al., 2012, p. 221). This framework

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