10 Key ERM Criteria
Ten critical characteristics that define an ERM program, and which can be used as a benchmark to evaluate the robustness of any ERM program.
A misalignment of interests between management and the primary stakeholders.
Two ERM metrics at the enterprise level: enterprise risk exposure and risk appetite.
A tool for performance measurement and management that includes financial goals and non-financial goals.
Guidelines developed by a group of global banking regulators in an attempt to improve risk management practices. Basel II, an international guideline for risk management, influenced the advancement of ERM practices in the financial services sector.
Baseline company value
Management's calculation of company value based on distributable cash flow projections consistent with the strategic plan baseline financial projection. This is management's estimate of shareholder value, contrasted with market capitalization, which is the market's estimate of shareholder value. The baseline company value is the value investors would pay today, if they believed that management will be able to perfectly execute the strategic plan and that everything will go the way the company expects. This is the baseline from which any deviation constitutes a risk in the value-based ERM approach.
Baseline risk scenario
The risk scenario which is neither upside nor downside but where the risk event occurs precisely as ...