ENTERPRISE RISK MANAGEMENT

Enterprise risk management (ERM) is described as "the methods and processes used by organizations to manage risks and seize opportunities related to the achievement of their objectives...which typically involves identifying particular events or circumstances relevant to the organization's objectives (risks and opportunities), assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring progress" (Wikipedia).

Essentially, this enterprise risk management is what most companies are using nowadays to protect themselves from a variety of different risks they may face in their businesses and industries. It can involve a variety of different actions on the part of the company, including avoidance, reduction, sharing, and acceptance, depending on what the risk is.

From reading the Wikipedia article I think it is great how many companies are embracing this process of protecting themselves from risks - it helps everyone from management, to the organizations themselves, to the shareholders, and even the community.

One example I found of a company using ERM effectively is Walmart (GOLIATH Business Knowledge). Walmart has created a very structured ERM process designed around four basic questions: "What are the risks? What are we going to do about these risks? How will we measure whether we are having a positive or negative impact on the risks? How will we demonstrate shareholder value?"

Walmart's results have been very positive from implementing this process:
"Mario Pilozzi, the company's country president in Canada has been very active with the process. A year ago, he presented his results at the audit committee meeting. He reported: 'ERM helped us identify clear deliverables directly related to risk mitigation. It enabled the team to remain focused on key risk areas, and ERM challenged us to tie our results from our action plans to the bottom line and shareholder value.'"

Clearly through strategic planning, operations management, and internal controls such as those implemented by Walmart, ERM can be very effective for helping companies manage the many risks they face.