Module 1 - What is ERM Flashcards
The basics of what ERM is (10 cards)
What is ERM?
Enterprise Risk Management (ERM) is the process of identifying, assessing, managing, and monitoring all risks across an organization to maximize value.
How does ERM differ from traditional risk management?
Unlike traditional risk management, which often addresses risks in silos, ERM takes a holistic approach, considering all types of risk in an integrated manner.
What are the key components of an ERM program? Include a mnemonic.
Risk identification, risk assessment, risk response, risk monitoring, communication and consultation, and continuous improvement. Mnemonic: ‘I ARM CC’.
What is the role of a Chief Risk Officer (CRO) in ERM?
The CRO leads the central risk function, oversees the ERM framework, and embeds risk culture throughout the organization.
What are the challenges of implementing ERM? Include a mnemonic.
Challenges include cultural resistance, complexity of aligning with strategic goals, and ensuring genuine commitment to ERM principles. Mnemonic: ‘C3’ for Culture, Complexity, Commitment.
What benefits does ERM provide to an organization? Include a mnemonic.
Benefits include improved decision-making, increased resilience to risks, enhanced risk response decisions, and better capital allocation. Mnemonic: ‘DIRE’ for Decision-making, Increased resilience, Risk response, Enhanced allocation.
Describe the holistic approach in ERM.
The holistic approach involves managing all risks across the enterprise in a cohesive and integrated manner, rather than managing them in isolation.
What is risk appetite and its role in ERM?
Risk appetite is the amount and type of risk an organization is willing to accept to achieve its objectives. It guides the risk management process in ERM.
Explain the importance of continuous monitoring in ERM.
Continuous monitoring ensures that the organization’s risk management strategies are effective over time and adapt to changing risk landscapes.
How is risk response developed in ERM? Include a mnemonic.
Risk response strategies are developed based on the assessment of risks, considering the organization’s risk appetite, and may involve avoiding, reducing, transferring, or accepting risks. Mnemonic: ‘ARTA’ for Avoid, Reduce, Transfer, Accept.
