4 Steps to Effective Enterprise Risk Management

Radhika Sivadi

2 min read ·


4 Steps to Effective Enterprise Risk Management image risk umbrella2 300x300risk umbrella(2)The bigger a business is, the more it has to lose. If a company doesn’t create an effective risk management plan, it could soon find itself in major trouble for overlooking an easily avoidable event. The price of not having a risk management plan can very quickly outweigh any cost related to creating one. Enterprise risk management ensures that risks are evaluated and avoided and any opportunities to achieve the company’s objectives are seized. Let’s take a look at the 5 key steps of enterprise risk management.

Objectives & Risk Appetite

Before an organization can begin to identify risks, a clear set of objectives must exist. When these objectives are set, the company must have a clear philosophy towards risk management. The company’s risk appetite, the environment the company operates in and its code of ethics will dictate what this philosophy is. Enterprise risk management ensures that management has a process in place to set these objectives and to make sure the company’s risk philosophy and risk appetite are in-line with these objectives.

Identification & Assessment

Events that could affect the achievement of a company’s objectives are the next consideration in the enterprise risk management process. These risks, internal and external, must be identified and assessed. The factors considered when assessing risks are: their likelihood, potential impact and how they need to be managed.


When risk has been identified and assessed, the next step of the enterprise risk management process is to respond to these potential events. From here, a company can choose to avoid, accept, share or reduce risk. One of these responses is applied to each event based on a company’s risk appetite and tolerance.

Application & Monitoring

Enterprise risk management must be applied at every level of an organization. Employees at each level must have the potential to affect the implementation of the risk management plan. This is done by applying policies and procedures that allow risk response to be effectively carried out. Communication is central to the application of risk management procedures and the monitoring of risk. Any information regarding risk must be communicated in an appropriate manner and in good time. This communication must exist across a company, at every level.

Effective enterprise risk management is an on-going process. Once a strategy has been set out, it must be applied across an organization. Evaluation of previously identified risk and good management are central to this. Once a risk management process has been established, modifications will occasionally need to be made to keep the plan up to date with the constant changes with-in a company. Once an enterprise risk management plan has been clearly set-out this can be achieved with ease.

Forming an Enterprise Risk Management procedure can take a lot of planning. If you have question, ask it here and one of our agents will give you an answer for free.

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Radhika Sivadi