The Basics of Enterprise Risk Management

Risk management actions are important for all businesses, regardless of their size or segment. 

To understand this, just remember that, whatever the process in your daily life, the risks represent uncertainties regarding the results achieved. It may be the risk that the raw material will run out, that a machine or equipment will stop working, that a tool will fail, that productivity will fall, in short. 

As much as you use accurate data when making your projections, it is impossible to determine with 100% certainty what will be the effects derived from your team's actions. These uncertainties can either disappoint you in the end, but they can also surprise you positively by presenting better results than expected. 

Thus, we understand them both as risks and as potential opportunities. 

In the same way that uncertainty is able to bring a positive balance, adding value, it can result in a failure or defect, affecting the quality of delivery to the customer and, consequently, the company's image with the public. 

Within a bankbank risk management is the sector that is responsible for planning, executing and measuring actions to verify and mitigate existing threats. In other words, the area seeks to maximize the chances of success for the project and even for the business itself, focusing on uncertainties to avoid negative situations and seize opportunities. 

According to the international standardsrisk management must protect and create values ​​for the company based on its actions, becoming an integral part of the daily production, in order to contribute to decision making. 

This is only possible when the professionals involved are free and willing to face uncertainties explicitly, without fear of contradicting anyone inside the company. Work must be systematic, maintaining a routine in your daily actions, while preparing to deal with positive risks, which are business opportunities. 

The dedication needs to be constant and the manager must make sure that he is equipped with all the relevant information inside and outside the company to make the decisions that will guarantee greater productivity. This improvement in quality , however, cannot come at the expense of the health and well-being of workers - which, in itself, would be a huge risk for the company. 

Whoever proposes to manage risks must be aware that cultural differences will exist and, therefore, it is necessary to be prepared to deal with situations in a transparent manner, always valuing the dynamism to maintain an inclusive management. Finally, all of these principles unfold in an organizational culture that empowers workers and ensures continuous improvement in processes. 

What is the objective of risk management? 

The main objective of risk management, as the term suggests, is to reduce negative risks and make the most of the positive risks that are presented to the company. Secondarily, it also acts as an instrument of regulation and balance between the actions of the organization and its appetite for risk. 

In other words, the area helps the manager to understand whether the strategies adopted by his business are aligned with the availability of taking risks. After all, is the company in a position to take risks or does it intend to adopt a more conservative stance? 

During the process, mistakes and successes will also provide greater clarity as to which are the most appropriate responses to deal with risks, in order to reduce waste and operational losses. It is important to keep in mind that, in general, risks do not appear in isolation within the processes. 

This means that the same error or failure can affect several parts of an organization - individual or general risk - and that it is necessary to be prepared to identify these issues, proposing solutions capable of resolving the error in a broad way. In the end, a management that is prepared to deal with risks is able to make better use of opportunities, optimizing productive resources. 

No matter what the segment or business model, entrepreneurship will always be a risky activity. Whether you are launching a new business or if the challenge is to keep a company already consolidated in the market strong, threats will be present. 


However, there are still actions that every company can implement in their daily lives to make sure that, as they arise, uncertainties will be dealt with in the best possible way. 

It is precisely at this moment that risk management comes into play. 


As we have seen so far, the area is responsible for planning, executing, monitoring and mitigating production errors, acting on opportunities and creating strategies to maximize results and minimize failures. So, even if you plan all the details, the risk will always exist, which requires knowing how to deal with each situation when identified. In this sense, risk management is extremely important, as it can be the differential for the success or failure of a project or business. 

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  • While I have no particular comment on the text of this article, the title is very misleading.  This article does not address enterprise risk management (ERM). Instead, it confuses risk management in general (the text) with ERM in particular (the title).  ERM is specifically a portfolio management approach to addressing risk across an organization, rather than within functional or programmatic silos, and the use of strategic planning to guide risk identification and treatment. One definition of ERM is "a discipline that addresses the full spectrum of an organization's risks, including challenges and opportunities, and integrates them into an enterprisewide, strategically aligned portfolio view".  ERM is an important concept, and we are not well served by inferring ERM is simply a synonym for risk management, or traditional risk management (i.e., within silos) across an enterprise.

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