Pages

Friday, March 14, 2008

How to Implement an ERM program

In business, enterprise risk management (ERM) includes the methods and processes used by organizations to manage risks (or seize opportunities) related to the achievement of their objectives.

Goals of an ERM program
Organizations by nature manage risks and have a variety of existing specialized departments or functions ("risk functions") that identify and manage particular risks. However, each risk function varies in capability and how it coordinates with other risk functions. A central goal and challenge of ERM is improving this capability and coordination, while integrating the output to provide a unified picture of risk for stakeholders and improving the organization's ability to manage the risks effectively.

Typical risk functions
The primary risk functions in large corporations that may participate in an ERM program typically include:

  • Strategic planning - identifies external threats and competitive opportunities, along with strategic initiatives to address them
  • Marketing - understands the target customer to ensure product/service alignment with customer requirements
  • Compliance & Ethics - monitors compliance with code of conduct and directs fraud investigations
  • Accounting / Financial compliance - directs the Sarbanes-Oxley Section 302 and 404 assessment, which identifies financial reporting risks
  • Law Department - manages litigation and analyzes emerging legal trends that may impact the organization
  • Insurance - ensures the proper insurance coverage for the organization
  • Treasury - ensures cash is sufficient to meet business needs, while managing risk related to commodity pricing or foreign exchange
  • Operational Quality Assurance - verifies operational output is within tolerances
  • Operations management - ensures the business runs day-to-day and that related barriers are surfaced for resolution
  • Credit - ensures any credit provided to customers is appropriate to their ability to pay
  • Customer service - ensures customer complaints are handled promptly and root causes are reported to operations for resolution
  • Internal audit - evaluates the effectiveness of each of the above risk functions and recommends improvements

Related Links: 
San Francisco recruiters  



No comments: