Components Of Enterprise Risk Management

5.1 Enterprise risk management – an overview

Enterprise risk management is a procedure designed to categorize impending events that may distress the entity, and minimize the risk and constrain it to entity’s risk appetite, to proffer rational assertion regarding the accomplishment of entity goals and objectives.

Normally the enterprise risk management is influenced by a company’s officials or any entity’s board of directors, management staff and other personnel, functional in policy setting and across the enterprise (a project, venture, company, etc). The description is reflected by a few assured elementary concepts. Enterprise risk management is an ongoing process, and in a manner of speaking it flows through the entity. The process is dependent

It confines or includes some significant concepts fundamental regarding management of risk by companies and other organizations, proffering a foundation for relevance across industries, sectors and organizations. It aims to directly accomplish the goals and objectives recognized by a meticulous entity and provide a foundation for defining enterprise risk management efficacy.

5.2 Components of Enterprise Risk Management

Typically there are eight components of Enterprise risk management, and they are interrelated. These components are derivatives of management’s working style and are incorporated with the management progression. These components are as follows –

 Internal Environment – The internal environment entails the attitude of an organization, and determines the course for how risk is analyzed and managed by an entity’s personal or management team per se, this incorporates risk management viewpoint and risk appetite, reliability and moral values, and the environment in which organization and the management team

 Information and Communication – Significant and relevant information is recognized, identified, confined, and communicated in a structure and timeframe so that the management team as well as the organization can loyally perform their responsibilities. Effectual communication also takes place in a broader sense, flowing down, across, and up the entity.

 Monitoring – The summation of enterprise risk management is monitored, supervised and essentially improvised. Monitoring is attained in the course of enduring management activities, separate assessments, or both in some special cases.

Enterprise risk management is not stringently a successive process, where one constituent influences only the one adjacent to it. It is a “multidirectional,” iterative process in which almost every component is capable of influencing any other component so it does.

5.3 Accomplishment of objectives

This enterprise risk management structure is developed in such a manner that it attains all the (maximum) goals and objectives desired by the entity, and it is set forth in four categories