Enterprises Risk Management

Win in the flat world

 What is Risk

Risk exists if there is something you don’t want to happen – having

a chance to happen!!!
The probability that some event will cause an undesirable outcome
on the financial health of your business and business goals.
What is ERM?

Definition

“Enterprise risk management enables

management to effectively deal with
uncertainty and associated risk and
opportunity, enhancing the capacity to
build value.”
Components of Enterprise
Risk Management
1. Internal Environment
2. Objective Setting
3. Event Identification
4. Risk assessment
5. Risk Response
6. Control Activities
7. Information and Communication
8. Monitoring
 “Risk Increases” -
The More You Don’t Know

All The Potential Outcomes

The Probability of Occurrence
Cost of a Undesirable Outcome
 Said Another Way:
The more you do know and understand about

All The Potential Outcomes

The Probability of Each Outcome Occurring
Cost of Undesirable Outcomes

the better long term risk manager you will be.

 Overall Categories of Risk
Legal Risk Price Risk

Financial Environmental
Risk Risk
Market
Risk 5 D’s Risk
- Death
Relationship/ - Disability
Public Family Goals - Disagreement
Relations & Objectives
- Divorce
Risk - Disaster

Human Production
Resources Risk
Risk
Overview of Enterprise Risk
Management in Finance
 Revenue
 Underwriting profit
 Investment profit
 Pre-tax operating income
 Return on equity and total capital
 Net income
 Economic value added
Why is implementation a
challenge?
 ERM objectives not aligned to corporate
objectives
 Insufficient commitment from top
management
 Inadequate conceptualization of ERM model
 Poor decision support / inadequate tools and
systems for statistical analysis
 Cultural mismatch
A structured approach to
implementation
Example: ERM Organization
Vice President and
Chief Risk Officer

Insurance ERM Corporate Credit

Risk Manager Director Risk Manager

ERM ERM Commodity

Manager Manager Risk Mg.
Director

Staff Staff Staff

Conclusion

 No business entity is risk free

 ERM is a process that is not limited
 It is a dynamic process
Thank You