Customizing Enterprise Risk Management

Big businesses today increasingly face a variety of risks, including security threats, operational risks, liquidity and financial risks, and other market risks. Enterprise risk management (ERM) in this scenario focuses on improving and augmenting the compliance landscape. Risk management is one of the crucial aspects of governing an enterprise.

Enterprise risk management basically accords companies to understand the risks that they face, how much tolerance can they develop for them, measure exposure to potential risks, develop a process to manage them and ensure that their risk profile is regularly updated. It offers competitive advantages to a company by helping a firm not just manage their finances, but the whole business effectively. Sound risk management enhances the value of a company in the market and positions it at a better level than its competitors. Further, ERM lets a business ascertain its profit needs and build frameworks to secure future interests.

A career in risk management is of equally high value. Risk analysts primarily look after investments to be made on behalf of their organizations. They are responsible for determining the financial risks and operational costs which the company will have to incur, if it goes ahead with an investment plan. Risk analysts are usually employed in the banking sector, or multinational consultancies. They are a part of corporate accounting teams and have to examine statistical reports and other documents to safeguard interests of the company and its employees. If required they also have to go to the field to collect relevant data for their employers. A risk analysts has to have a thorough understanding of financial structures, regulations, and implications within the economy where their organization is based. Since they acquire specialized knowledge of their field, senior risk managers determine the overall success of an organization.

Customizing enterprise risk management requires a person to possess a sound academic background. Most straightforward way to forge a career in this field is to pursue an undergraduate degree in commerce, finance, or international business management. This serves the purpose of familiarizing a student with intricacies of the field. Courses aiming to provide a seamless blend of theory and practice hold high relevance for this industry. There are also certifications and short term courses in ERM which can be pursued. ERM courses are generally designed for all the sectors of an economy – public, private and non-profit. Further, it is also ideal to know what an employer demands. Most employers would hire an analyst based on his or her qualifications supplemented by relevant experience of at least five years. However, fresh graduates who are hired mostly possess post graduates qualifications as well. Master degree programs take an in-depth view of the field through courses, such as investment planning, work integration, hedging and derivatives, asset securities, quantitative risk management, and investment statistics and probability. Another interesting component of enterprise risk framework is management of Information Systems (MIS). A degree in MIS can be useful to equip a learner to perceive the reasons for risk and ensure acceptability and timely implementation of solutions.

The financial and business industry has to retain its profitability even in the instable economic business environment. Owing to this factor, big businesses and consultancies are always on the lookout for the right talent. A report by U.S Bureau of Labor Statistics predicted that jobs for risk analysts would increased by about 9 percent globally within the decade 2012-2022. However, increasing demand in talent directly implies that advanced models for ERM be built.

Embedding ERM within an organizational structure needs an assessment of specific policies, objectives, risk infrastructure and procedures. Customizing ERM according to these aspects is incumbent for sailing through threatening situations. Examining and evaluating being first steps are followed by methods to mitigate and lessen the impact of risk on the organization. This can be done through already documented procedures with appropriate control measures deployed in time. Another way to mitigate risks is through development of new mitigation plans in the absence of any previous procedures. Mitigation of risk is backed up by effective monitoring of risk appetite of the organization. Risk appetite can be simply defined as the amount of risk which an organization is willing to take to achieve its strategic objectives.

Lastly, customizing ERM for an organization is the key responsibility of senior management and the finance teams. ERM can be successful through assessment of three values- risk tolerance levels, risk targets, and risk limits. Once these values are known, productive decisions can be taken while monitoring the impact of risks.

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