Enterprise Risk Management Report: Techniques and Issues

This report provides an in-depth analysis of Enterprise Risk Management (ERM) with a specific focus on small and medium enterprises (SMEs) in the UK. It examines the effective use of various techniques and models, including strategic tools like SWOT and PESTLE analysis, risk categorization, and compliance with legal frameworks. The report also addresses key issues faced by SMEs, such as economic recessions, fluctuating inflation and interest rates, loss of key staff, machine breakdowns, and unfair competition. Various authors and their perspectives on ERM are discussed, offering a comprehensive understanding of the challenges and strategies involved in managing risk within these organizations. The report concludes by summarizing the discussed tools, techniques, and issues, emphasizing the importance of proactive risk management for the sustainability and growth of SMEs in the UK. It highlights the value of professional decision-making, resource optimization, and employee training in mitigating risks. The report references several books and journals to support its findings.

ENTERPRISE RISK
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
Effective use of techniques and models in enterprise risk management.....................................3
Key issues faced by firm in enterprise risk management............................................................5
CONCLUSION................................................................................................................................5
References .......................................................................................................................................7

INTRODUCTION
Enterprise risk management is a technique used by the small and medium enterprises to
control and monitor overall risk. It is essential of the small enterprises to manage risk because it
can cause damage to earnings and capital of the firm. Further, the report will analyse the
effective use of tools and techniques of risk management used by small and medium enterprises
to evaluate and manage uncertainties. The small and growing enterprise of UK uses these
techniques in order to maintain the growth and development of the entity in the country. Hence,
the report will analyse the literature review over the techniques and key issues faced by
organisation while managing risk.
Effective use of techniques and models in enterprise risk management.
According to Zhao, Hwang Pheng Low (2014), The small and medium enterprises should
follow the specific framework to control and manage risk which is a step wise process and
includes all the activities and operational of the firm. The steps are as follows:
 The companies should first focus on categorising the risk which can come across.
 Secondly the medium and small enterprises of UK should evaluate and measure the
activities and events which can affect the enterprise.
 In the third stage of risk management, the entity should be accountable to risk.
 Lastly, the firm should focus on analysing and implementing the risk management
activities.
In contrast, as per Chitakornkijsil (2010), the SME's of UK should use strategic tools like
Pestle and Swot analysis to monitor and control risks because these factors comprise both the
environment of the organisations which helps them in making assumption to manage risk.
In contrast, Charette (2010), has stated that analysing the risk from political, economic,
social and legal environment can help the small enterprises in dealing with uncertainties and
managing risk within the organisation.
Furthermore, in contrary McNeil (2013), as stated that in order to control and measure
risk, small enterprises should focus on complying the operations and functioning of company
with legal framework of the country and the firm should also maintain the societal and
environmental condition, quality of products, and its relationship with its customer. Moreover,
the enterprises should ensure optimum utilization of resources which will reduce the wastage and
will further help in managing risk. Hence, the author states that professional decision making,

planning and prioritizing operational activities will assist the small size organisations in
controlling risk and uncertainties.
In contrary, according to Chapman (2011), The small and medium firms of UK should
manage the four types of risk to enhance the growth and development of the company. The four
factors of enterprises are as follows:
Strategic: The firm should enhance the employees’ adapting spirit in changes of business
strategy, innovation of product, advancement in technology helps the organisation in managing
risky situations.
Operational: Employees of small enterprises should be trained to make efficient use of
resources, physical property, machinery, and product supply which will decline the production
cost of operations.
Compliance: SME's should maintain the environment of the enterprise considering the
governing regulations of UK like, health and safety of staff members at workplace,
environmental conditions and taxes (local and statutory) which will help in reducing risk.
Financial and reporting: Enterprises should follow the systems of finance and corporate
world like funding and cash flow, currency exchange, credit policy, of UK because the violation
of financial statement can lead to major risk for the SME's.
In contrary, Smit and Watkins (2012), stated that small and medium enterprises can
manage risk by using basic tools and techniques like, brainstorming of workforce, managing
inventories and lost data, by following self-assessment techniques with the organisation on
regular basis, by analysing the scenario of external and internal environment, by making use of
updated technology, by organisational risk surveys and risk questionnaires, by calling on training
session for employees on quarterly basis to makes them aware about advancement in equipment
and guiding them way towards the organisational goals.
According to Levett and et.al., 2017), the best way to manage risk within the small entity
of UK is by using the risk management model which consists of two bases that are probability of
risk for the company which can be low, medium, high and impacts which can be severe moderate
and limited. Henceforth, using this model helps the small size firms in identifying and
calculating the impact of certainties.

Key issues faced by firm in enterprise risk management.
According to Marcelino-Sádaba and et.al., (2014), The company faces major risk
management from the external factor which is Economic Recessions the external environment of
the enterprises, which cannot be measured. The small and medium enterprises are majorly
affected by the economic recession of UK. SME's are weak in term of business plans,
management and key structure that is why it becomes more tough for the firm to manage and
control risk.
In Contrary, as per Brustbauer (2016), continuous change in inflation rate of UK has
affected the SME's for long term. The firms take measures to minimize the risk from changing
inflation rate, but the techniques are rough to manage the uncertainties in the operational
activities of the entity. In contrast, the fluctuation in interest rates led a big time impact on
medium and small enterprises of UK. The companies are weak in terms of business plan and
structure if compared to the large business enterprises which further increases the inability to
deal to with risk and threats. Besides, the firm even do not have much capital to invest and
depends on the borrowings and lendings which also became difficult with continuous fluctuation
in interest rate of the country.
Wonglimpiyarat, Wonglimpiyarat (2017), has stated that the small and medium
enterprises of UK, suffers from loss of key staff which is the enterprises do not have the expert
staff instead the firms faces the wastage of manpower and waste of training cost. The small
organisations of UK like Unicorn, have high degree of turnover instead of quality staff.
According to Pojasek (2017), the medium and small enterprises of UK faces the key risk
from critical machine break downs because the entity's do not have efficient maintenance system.
In contrast, in UK the small firm have 50 percent have insurance cover of machines and
equipments and other 50 are the standby machines.
In contrary, According to Harris (2017), the small and medium enterprises suffers from
key issues of risk management like unfair competition, political instability, advancement in
technology, reputational damages, and unfavourable government regulation of UK. Hence,
managing risk is the key function of the companies so the entity should focus on maintaining and
controlling the key issues which can come in between of operation and production activities of
the firm.

CONCLUSION
The report concluded that, there are various tools and techniques which are stated by the
authors to manage and control the risk with the small and medium enterprises. Further, the report
evaluated the factors which affects the functioning and stability of small enterprises. Moreover,
the report states several tools and techniques which can be helpful in managing the risk of small
and medium enterprise of UK. Besides, the report also evaluated the key issue faced by the firm
of UK because of environmental and economic changes. Hence, the report concluded with
different theories of different authors on the enterprise risk management of United Kingdom.

References
Books and journals
Chitakornkijsil, P., 2010. Enterprise risk management. International Journal of Organizational
Innovation. 3(2). p.309.
Charette, R. N., 2010. Enterprise Risk Management. The Next Wave of Technologies:
Opportunities from Chaos. pp.265-283.
McNeil, A.J., 2013. Enterprise Risk Management. Annals of Actuarial Science. 7(1). p.1.
Chapman, R.J., 2011. Simple tools and techniques for enterprise risk management. John Wiley
& Sons.
Smit, Y. and Watkins, J. A., 2012. A literature review of small and medium enterprises (SME)
risk management practices in South Africa. African Journal of Business Management.
6(21). p.6324.
Sweeting, P., 2017. Financial enterprise risk management. Cambridge University Press.
Levett, J. M. and et.al., 2017. Enterprise Risk Management in Healthcare. In Surgical Patient
Care. Springer International Publishing. (pp. 67-86).
Marcelino-Sádaba, S. and et.al., 2014. Project risk management methodology for small firms.
International Journal of Project Management. 32(2). pp.327-340.
Zhao, X., Hwang, B.G. and Pheng Low, S., 2014. Enterprise risk management implementation in
construction firms: An organizational change perspective. Management Decision. 52(5).
pp.814-833.
Brustbauer, J., 2016. Enterprise risk management in SMEs: Towards a structural model.
International Small Business Journal. 34(1). pp.70-85.
Harris, E., 2017. Strategic project risk appraisal and management. Routledge.
Pojasek, R.B., 2017. Organizational risk management and sustainability: A practical step-by-
step guide. CRC Press.

Wonglimpiyarat, J. and Wonglimpiyarat, J., 2017. Technology auditing and risk management of
technology incubators/science parks. World Journal of Entrepreneurship, Management
and Sustainable Development. 13(1). pp.44-56.