Challenge: Your Book States Performance Outcomes That Drive

Challenge 4your Book States Performance Outcomes That Drive Org

Challenge 4your Book States Performance Outcomes That Drive Organizations to adopt ERM are 1) enhanced regulatory compliance, 2) increased accountability, 3) improved performance and decision making, 4)pressure from the board members , senior leadership and external stakeholders, 5) enhanced understanding of organizational risk, 6) improved ability to navigate crises. Research and discuss an example of each. After reading Chapter16, write 1-2 page speech and 2-3 slides. Only Part 5!!! Enhanced understanding of organizational risk.

Paper For Above instruction

Understanding Organizational Risk: An Essential Component of Enterprise Risk Management

Part 5 of the performance outcomes driving organizations to adopt Enterprise Risk Management (ERM) emphasizes the importance of enhanced understanding of organizational risk. This outcome pertains to an organization’s ability to thoroughly identify, assess, and comprehend the myriad of risks that could affect its strategic objectives and operational effectiveness. Gaining a comprehensive understanding of risks allows organizations to develop more effective mitigation strategies, allocate resources more efficiently, and align risk responses with their overall strategic goals. This enhanced understanding is fundamental for informed decision-making at all levels of an organization, providing a foundation for resilient and adaptive operations in a complex and ever-changing environment.

For example, a multinational manufacturing corporation adopted ERM to improve its awareness of global supply chain risks. Prior to ERM implementation, the company lacked a consolidated view of potential disruptions, such as geopolitical tensions, natural disasters, or supplier insolvencies. By integrating risk assessment processes across its divisions, the company gained a clearer understanding of the interconnected risks and vulnerabilities within its supply chain. This comprehensive insight enabled the leadership to develop contingency plans, diversify suppliers, and implement early warning systems, thereby reducing the likelihood and impact of disruptions. Consequently, the organization not only minimized losses during unforeseen events but also enhanced its strategic agility in responding to global market changes.

Similarly, a financial institution enhanced its understanding of operational and cyber risks through ERM initiatives. Recognizing the increasing sophistication of cyber threats and operational failures, the bank established enterprise-wide risk assessments and continuous monitoring systems. This deeper insight into vulnerabilities allowed management to prioritize cybersecurity investments, improve internal controls, and train staff more effectively. As a result, the organization was better equipped to detect, prevent, and respond to security breaches and operational failures, thus safeguarding its assets and maintaining customer trust.

This example illustrates the profound impact of a shared and comprehensive understanding of risks. By systematically identifying and analyzing risks, organizations improve their capacity to anticipate potential challenges, allocate resources effectively, and implement strategic initiatives that foster resilience. As Chapter 16 highlights, cultivating an organizational culture that values risk awareness and transparency is crucial for sustaining competitive advantage and achieving long-term success.

Conclusion

In conclusion, the enhanced understanding of organizational risk facilitated by ERM frameworks is essential for strategic decision-making and resilience. It empowers organizations to not only recognize and quantify risks but also to embed risk awareness into their core operational processes. As demonstrated through the examples of the manufacturing firm and the financial institution, this outcome enhances an organization's ability to proactively manage uncertainties, capitalize on opportunities, and sustain long-term growth amidst an increasingly unpredictable global environment.

References

  • Fraser, J., & Simkins, B. (2016). Enterprise Risk Management: Today's Leading Research and Best Practices for Tomorrow's Executives. Wiley.
  • Lam, J. (2014). Enterprise Risk Management: From Incentives to Controls. Wiley.
  • Power, M. (2007). Organized Uncertainty: Designing a World of Risk Management. Oxford University Press.
  • Beasley, M. S., Clune, R., & Hermanson, D. R. (2005). Enterprise risk management: An empirical analysis of factors associated with the extent of implementation. Journal of Accounting and Public Policy, 24(6), 521–531.
  • Hoyt, R. E., & Liebenberg, A. P. (2011). The value of enterprise risk management. Journal of Risk and Insurance, 78(4), 795–822.
  • ISO 31000:2018. Risk Management — Guidelines. International Organization for Standardization.
  • McClure, M. (2016). Risk management: An introduction. Journal of Business Administration Research, 5(3), 45–52.
  • Harrington, S. E., & Niehaus, G. (2004). Risk Management and Insurance. McGraw-Hill Education.
  • Bessis, J. (2015). Risk Management in Banking. Wiley Finance.
  • COSO Enterprise Risk Management — Integrated Framework (2017). Committee of Sponsoring Organizations of the Treadway Commission.

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