Enterprise Risk Management - ERM Frameworks Defined

ERM Frameworks Defined

There are various important ERM frameworks, each of which describe an approach for identifying, analyzing, responding to, and monitoring risks and opportunities, within the internal and external environment facing the enterprise. Management selects a risk response strategy for specific risks identified and analyzed, which may include:

1. Avoidance: exiting the activities giving rise to risk
2. Reduction: taking action to reduce the likelihood or impact related to the risk
3. Alternative Actions: deciding and considering other feasible steps to minimize risks.
4. Share or Insure: transferring or sharing a portion of the risk, to finance it
5. Accept: no action is taken, due to a cost/benefit decision

Monitoring is typically performed by management as part of its internal control activities, such as review of analytical reports or management committee meetings with relevant experts, to understand how the risk response strategy is working and whether the objectives are being achieved.