Introduction to the Concepts of Enterprise Risk Mangament In a Business Organization

What is Enterprise Risk Management

Enterprise Risk Management in simple terms is defined

as the methods and procedures used by

different organizations managing the risks and seizing the opportunities

related to the achievements in their

business organizations.

What is Enterprise Risk Management

Enterprise Risk Management in any said to a part of any business lexion and understanding managing the

risks at its most important concern. The Risk is said to be inherint in the Business.

When Given importance risk management it is not shocking that risk management is receiving scrunity from

the top business organizations, banks, financial institutions and many more.

Enterprise Risk Management

Business Organizations

Management Process has thus become

synonymous when compared to the

process of enterprise risk management

Sources of Enterprise Risk Management

Interest Rate Risk: It is generally the adverse effect of the interest rate movements on the profit of a particular firm or the balance sheet. It is affected in two major ways one is by affecting the firms and the other is through the assets or the liabilities.

Sources of Enterprise Risk Management

Financial Risks: Generally refers to the bankruptcy and the possibility of the firm who is not able to repay the debts

on time.

Higher the debt equity ratio firm higher would be the financial risks faced by it.

Liquidity risks and having the wrong capital structure are the major reasons for the

financial risks.

Sources of Enterprise Risk Management

Business Risks: Risks faced by most of the

business organizations from the internal and the external

environment.

Labour strike, death of key personal and machinery

break down etc are some of the internal causes.

External Causes would include government policy, changes in the customers

preferences etc.

Sources of Enterprise Risk Management

Market Risks: It is generally the value of all

the investment firms going down as a result of the

movements caused in the market. Market Risks is also know as the price

risks.

Changing form of Enterprise Risk Management

We all know that enterprise risk management is associated with each and every business. But when it comes to financial system risk is not

apparent. The earlier ethos detect, inspect, react have

been substituted with some of the major concepts like anticipate, prevent, monitor and mitigate.

Enterprise Risk Management - Process

Enterprise risk management includes the following process Identifying the major risks: Each and every corporate needs to identify the possible sources of risks and the types of risks faced in

the organization. Determining the major objectives: This includes the profits, or

the developed competative advantage. Decided to be management.

Risk Evaluation process: Once the risk in the organization is identified they need to be evaluated by ascertaining their

significance. Development of the policy: This is based on the tolerance level

of the firm where the risk management policy needs to be developed.

Enterprise Risk Management Techniques

Enterprise Risk Management involves the following techniques.

Internal Techiques: Internal Techniques here are the part of the day to day operations of the

particular firm. External Risks: They are the ones who require the company to enter the financial contract with

the market entity.

Enterprise Risk Management Techniques

Management of Business Risk: Some of the businesses are not manageable, they are something that

have to be borne. Asset Liability Management: Is generally an effort

put to minimize the exposure to the price risk along with the combination of assets and liabilities in order to meet

up the needs and requirements of the firm.

Guidelines for Enterprise Risk Management

Proper mix of enterprise risk management techniques: Involves most optimum mix of the risk control, prevention, and

retention. Common goal of risk management and financial

management: Creating the share holders wealthand generating the net present value.

Proactive enterprise risk management process: Number of uncertainities caused when compared to the financial

market. Continous changes in the interest rate, exchange rate,

commodity prices, economic variables, and external environment a reality.