ITS835 – Enterprise Risk Management Section – ITS-835 Online ✓ Solved

ITS835 – Enterprise Risk Management Section – ITS-835 Online

Course Description: This course goes beyond looking at risk management from the confines of quantitative topics to cover the full spectrum of risks that may emerge in enterprises. It covers a more holistic approach that includes the decisions and actions of employees in an active enterprise. It uses case studies to demonstrate the issues and challenges in total risk management. Finally, the course explores techniques for balancing enterprise risk and reward to enable performance optimization.

Course Objectives/Learner Outcomes: Upon completion of this course, the student will: • Design and implement an appropriate ERM framework and risk governance structure customized to any type of organization. • Conduct qualitative risk assessments to identify/prioritize key risks from among all risk sources. • Quantify all types of risks, including strategic, operational, financial, and insurance. • Develop a clear definition of risk appetite (the aggregate enterprise-level risk limit). • Enhance strategic planning, increasing the likelihood of achieving strategic plan goals. • Provide a rigorous business case for both business and mitigation risk-reward decision-making. • Assure the board of directors that key risks are well understood and managed. • Understand and satisfy ERM requirements from rating agencies, regulators, and shareholders.

Prerequisites: There are no prerequisites for this course.

Books and Resources: Required Text Fraser, J., Simkins, B., & Narvaez, K. (2014). Implementing enterprise risk management: Case studies and best practices. John Wiley & Sons. Other articles and readings may be assigned by course professor.

Paper For Above Instructions

Enterprise Risk Management (ERM) is a vital discipline within organizations today, as it encompasses identifying, assessing, and managing risks to ensure that organizations can achieve their objectives and create value amidst uncertainties. This paper will explore the concept of ERM in-depth, utilizing its theoretical foundations while drawing practical implications from real-world case studies. The principles laid out in the text by Fraser, Simkins, and Narvaez (2014) will serve as a guideline for understanding the critical elements of ERM, as well as providing insights into best practices for implementation.

Introduction to Enterprise Risk Management

Enterprise Risk Management (ERM) is increasingly recognized as a fundamental approach to managing risks across an organization as opposed to a siloed method where only individual risks are addressed in isolation. ERM adopts a comprehensive perspective on risk that includes strategic, operational, financial, and insurance risks. For example, the case studies examined in the course readings illustrate how large corporations successfully integrated ERM frameworks that engage all levels of decision-making and risk awareness (Fraser et al., 2014).

Designing an ERM Framework

To design an effective ERM framework, organizations must assess their unique context and environment, taking into account their operational structure, culture, and regulatory landscape. One critical aspect of a successful ERM framework is the alignment of risk management practices with the organization’s strategic objectives. This alignment ensures that risk considerations are central to decision-making processes (Beasley et al., 2010). The Framework outlined by COSO (Committee of Sponsoring Organizations of the Treadway Commission) provides a valuable guideline for organizations in establishing effective risk governance structures. The main components of the COSO framework include the internal environment, risk assessment, control activities, information and communication, and monitoring (COSO, 2004).

Qualitative and Quantitative Risk Assessment

Conducting risk assessments involves both qualitative and quantitative methods. Qualitative assessments provide a high-level overview of risk categories, utilizing interviews, focus groups, and workshops to identify significant risks within an organization. In contrast, quantitative assessments utilize statistical methods to evaluate the likelihood and impact of risks, facilitating a more data-driven approach for prioritizing risks (ISO 31000, 2018).

Effective qualitative analysis often leads to enhanced communication regarding risk, allowing stakeholders to understand the implications of key risk decisions. Moreover, quantifying risks helps organizations to establish a clear risk appetite—essentially defining the boundaries within which the organization is willing to operate (Harris et al., 2017). Risk appetite defines organizational thresholds of acceptable risks and provides guidance for strategic decision-making.

Risk Management Techniques

The techniques for balancing enterprise risk and reward include diversification, risk transfer, mitigation, and risk acceptance strategies. Diversification is a commonly employed strategy to spread risk across portfolios or product lines, limiting the impact of losses in any single area (Markowitz, 1952). On the other hand, risk transfer mechanisms, such as insurance, allow organizations to transfer certain risks to third parties (Dickinson, 2001).

Organizations also benefit from implementing mitigation strategies that call for reducing the likelihood or impact of risks through proactive measures, such as process improvements or technology investments (Woods & Barry, 2015). These steps not only minimize risks but may also enhance organizational performance and competitiveness.

Enhancing Strategic Planning

By effectively integrating ERM into strategic planning processes, organizations can improve their chances of meeting strategic goals. This stems from a robust understanding of the relationship between risk and opportunity (Meyer et al., 2016). For instance, effective risk management enables organizations to seize opportunities while having a thoughtful approach towards potential pitfalls. This proactive approach to risk management elevates strategic discussions to include risk perspectives, leading to more informed decisions that align with organizational objectives.

Conclusion

In conclusion, the practice of Enterprise Risk Management is essential for organizations seeking to navigate the complexities of today’s business landscape. Establishing a tailored ERM framework enhances the capacity to balance risk and reward, supports strategic decision-making, and ultimately contributes to long-term sustainability. By leveraging the insights gleaned from case studies and the guided principles outlined in the course readings, students of ERM can appreciate the significance of integrating risk management deeply into organizational culture and operations.

References

  • Beasley, M. S., Branson, B. C., & Hancock, B. V. (2010). Enterprise Risk Management: An Empirical Analysis of the Factors Associated with the Adoption of ERM. Journal of Risk Management in Financial Institutions, 3(3), 6-23.
  • COSO. (2004). Enterprise Risk Management - Integrated Framework. Committee of Sponsoring Organizations of the Treadway Commission.
  • Dickinson, G. (2001). Enterprise Risk Management: Its Origins and Conceptual Framework. Risk Management: An International Journal, 3(2), 157-178.
  • Fraser, J., Simkins, B., & Narvaez, K. (2014). Implementing Enterprise Risk Management: Case Studies and Best Practices. John Wiley & Sons.
  • Harris, R., O’Keeffe, J., & Roshak, T. (2017). Risk Management and Governance: Concepts and Guidelines for the Future. Routledge.
  • ISO 31000. (2018). Risk Management – Guidelines. International Organization for Standardization.
  • Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77-91.
  • Meyer, C. B., & Goes, J. B. (2016). Choosing the Right Strategy for Your Organization’s Risk Management. Business Horizons, 59(3), 299-308.
  • Woods, D. D., & Barry, J. (2015). Enterprise Risk Management: A Strategy for Moving Beyond Compliance to Create Sustainable Value. Risk Management, 17(3), 1-11.

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