What is Risk Management? What is Enterprise Risk Management?
What are the Differences?
Risk management is a process of identifying, assessing, prioritizing, and mitigating risks that could have an impact on an organization’s objectives. It involves a systematic approach to identifying and evaluating risks, developing strategies to manage them, and monitoring and adapting these strategies over time.
Enterprise risk management (ERM) is a more comprehensive approach to risk management that considers risks across the entire organization. It involves a structured and integrated approach to identifying, assessing, prioritizing, and managing risks that could impact the achievement of an organization’s objectives. ERM takes a holistic view of risk, looking at risks not just in individual departments or business units, but across the entire organization. ERM integrates risk management into an organization’s overall strategic planning and decision-making processes and involves all levels of the organization in managing risks.
The main differences between risk management and enterprise risk management are:
- Scope: Risk management typically focuses on managing risks in specific areas such as financial risk, operational risk, or information security risk. ERM, on the other hand, takes a broader view and considers risks across the entire organization.
Integration: ERM is more integrated into an organization’s overall strategic planning and decision-making processes, whereas risk management may be more siloed in specific areas or departments.
Stakeholder involvement: ERM involves all levels of the organization in managing risks, including senior management and the board of directors. Risk management may be more focused on individual departments or business units.
- Risk appetite: ERM takes into account an organization’s risk appetite and risk tolerance, and considers these factors when making decisions about risk management. Risk management may be more focused on minimizing risk without considering an organization’s overall risk appetite.
Overall, ERM provides a more comprehensive and strategic approach to managing risks across the entire organization, while risk management typically focuses on managing risks within specific areas or departments.