16.3 Key aspects of Enterprise Risk Management

ERM is:

  1. A process, not a one time analysis

  2. Enterprise wide basis

  3. Focus on critical or material risk

Risk:

  1. Has upside and downside, it’s when actual outcome \(\neq\) expected

  2. Must be quantified; Dependencies must be evaluated and quantified

Strategies:

  1. Are developed to avoid, mitigate, or exploit risk factors

  2. Are evaluated as a tradeoff of risk and return, to maximize firm value