Enterprise Risk Management

Organizations are usually set up to take advantage of opportunities or minimize certain risks. The value of all organizations is their ability or perception of their ability to deliver certain value, which implies either creating values out of opportunities or potentials and or eliminating or reducing risks. However, the concept of enterprise risk management is more parochial to organizations. It deals mostly, although not exclusively, with risks and opportunities an organization is exposed to in the conduct of its business. Risk management involves analysis of strengths, weaknesses, opportunities and threats. Risk management is entails identification and utility of opportunities and threats as well as diminishing and the mitigation of weaknesses and threats.

Organizations have always done risk management, just like organizations have always done accounting and inventory management, and I must say even improvement. However, over the years, these corporate practices (accounting, inventory management, improvement) have benefited from standardization and regulation. Financial risk management currently benefit the most from standardization and regulation in the form of very well known programs and laws including Bassel II , Sarbanes-Oxley, Japanes SoX and a panoply of others. COSO, the Committee Of Sponsoring Organizations of the Treadway Commission developed an enterprise risk management framework to fill the gap for a standard for organizations beyond the financial industry and their financial products.