Value of Enterprise Risk Management : Enterprise Risk Management creates stronger governance and compliance

Stakeholders – especially the shareholders and regulators are now demanding greater corporate transparency, making strong corporate governance a necessary component to almost every business. Enterprise Risk Management can contribute to successful compliant and effective governance enabling companies to better understand and measure those risks that threaten strategic objectives.

Moreover, Enterprise Risk Management provides information that helps quantify business performance, narrow the focus of controls and streamline compliance efforts. As a part of this process, some organizations have begun to use their risk objectives to create an integrated governance, risk and compliance (GRC) management framework. By establishing a GRC framework, companies are able to set their governance and enterprise risk objective first, and then use these objectives to define compliance control requirements including a conducive corporate control environment and culture.

Furthermore, the integration of governance, risk management, compliance and ethics can also help an organization more effectively and efficiently drive performance. Governance establishes objectives and, at a high level, the boundaries inside of which an entity must operate. Risk management helps a company identify and address potential obstacles to achieving objectives. Compliance management ensures that the boundaries are well set, and that the organization does indeed conduct business within those boundaries.

Finally, a strong culture provides a safety net when formal controls and structures are weak or nonexistent while, at the same time, providing an environment that helps the workforce reach its highest level of productivity.

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