Enterprise Risk Management - Case Study

Enterprise risk management

Introduction
Taking of risk is a natural part in any running enterprise. Risk has been expressed an issue
that associated with the unpleasant events. Risk management can be defined as analysing and
limiting the probability and undesirable events. The purpose of risk management is to allow
the organisations to solve uncertainty which include not only old problems but also new
problems that are happening in ever changing environments. Simply, risk management is a
way that can prevent uncertainty and risk from disturbing the strategic objectives and
achievement of an organisation. It is also a logical and rational means of understanding the
past and possible alternative project futures in order to make the better decisions.
Risk can happen in activities of every business; therefore, there is a need for risk
management. There are two basic ways that an organisation can take to manage the risks, first
is managing certain risk at certain duration or managing them based on interpreted basic
facts. Enterprise risk management is often referred as the latter approach. (Nocco and Stulz,
2006). Enterprise Risk Management is the latest way of vocabulary that emerge from risk
management industry that function is to signify all aspects of an enterprise including
activities for profit creation and loss prevention.
According to the COSO (2004), the definition of Enterprise Risk Management is a process
that is structured and consistent for identification, assessment and communication of the
objective and achievement of organisation. Therefore, it can be concerned that Enterprise
Risk Management is for the whole picture enterprise wide and the purpose is to ensure the
possible balance between threats and opportunities and to control the risk at a moderate level.
In practical way, this means certifying the possible basis for getting at decisions at the diverse
level of the organisation, therefore, overall decisions will be supported by those decisions. As
a subsequence, having a sound process and observing of decided activities are crucial to
certain the achievement.
Literature review of Enterprise risk management
In 1990s, the evidence of Enterprise Risk Management is occurred owing to related multiple
views on risks and it is resulted that the traditional risk management is not effective in
managing process and the framework of ERM is happened to fulfil the need. The occurrence
of risk in operation state, strategic state, politic state, technological state, legal state, financial
state, human resource state, state concerned with reputation are varied even in an
organisation. Cassidy (2005) stated that Enterprise Risk Management should be relevant to
Name – Zwe Nyunt Naing
ID - 10386856

organisational activities in order to organise, plan, control and minimise the major risks of
firm.
Generally, risk management is defined by international organisation for standardisation as the
activity to control and maintain an organisation in order not to occur risk, which means
uncertain events which will affect the achievement of organisations. The Committee of
sponsoring organisations of treadway commission (COSO 2004) defined the most widely
used ERM standard, which is a procedure or process which can have an effect of board of
directors and other management level personnel and can be used across the enterprise to
identify the potential events which can affect the objectives by settled strategy and can give
the reasonable certainty success for organisations.
Walker (2013) states that ERM can create the success of companies in terms of effective
costs, efficient labour, good location and other dimensions by using the basis management of
risk.
In the daily operation, the risk that company face seem to be more definite and obvious, often
seem to have catastrophic impacts which can create more shocking states for the companies
or organisations. Due to this condition, risk management require discipline to commit and
resolve recognising shocks and reallocate the assets for the organisations (Walker 2013).
According to the Wu et al. (2010), enterprise risk can be specified as external, internal and
procedural risk which have interdependent impacts. Risks need to be identified and managed
because risk itself is strongly connected to uncertain events and if these risks cannot be
minimised, the result can lead to loss and negative outcome for the organisations.
Rather than structural and functional approach, Enterprise risk management is more like the
procedural approach because the essence of ERM is to reduce and mitigate the uncertainty
occurrence and ifs effect which can be found along the project cycle and change these issues
into possible outcome.
Identifying, assessing and evaluating are the main basic of risk analysis, which should be
reformed and personalised according to several different internal and external risk conditions.
Hence, ERM , a very sensitive analytical tool, more approach to procedural activities such as
engineering, finance, banking, education and health care services.
There are two major ERM standards which are used mostly such as COSO ERM integrated
framework (2004) and the ISO 31000 standard (ISO,2009). The scope and definitions of