2. Why ERM? Flashcards
1
Q
What are the characteristics of a silo-managed org?
A
- Variety of definitions and classifications being used
- Diff documents used to record risks in diff dept
- No centralised record of risks faced by whole org
- No appreciation of total risk after allowing for interactions
- No stated risk appetite
- Same risk being managed differently in diff depts
- No account of diversifying effects when deciding how to manage risks
- Diff tools for assessing and measuring risk
- No senior staff member with responsibility for considering risk as whole
- Lack of reporting to board on risk due to inability to do this in structured way
- Risk not being considered when making strategic business decisions.
2
Q
Why might silo approach still be used?
A
- If RM has never been considered holistic, likely it will have been carried out on an ad-hoc basis, as and when necessary…
- … may have led to diff approaches being taken by diff departments
- Many of operations are divided along departmental lines e.g. staffing, budgeting etc. So silo rm fits this way
- Managers in some departments may be unwilling to cede control of their RM to a central risk function …
- … and see this as a loss of responsibility
- If acquisition or merger, diff parts of business may not have integrated well and past RM prevailed
3
Q
What are some potential sources to implement ERM?
A
- Past management failures
- “near-miss: within org
- High profile disaster in similar orgs
- Criticism or demands from regulators and auditors
- Other stakeholder concerns