Chapter 10

ERM for Non-Corporate Entities

Only those who dare to fail greatly can ever achieve greatly.

Robert F. Kennedy

Up to this point, we have discussed ERM in the context of applying it to corporate entities that operate for profit. In this chapter, we will discuss how to apply ERM to other entities. For convenience, we will refer to for-profit companies as corporate entities and all other entities as non-corporate entities, or NCEs. We will discuss how to apply ERM to such NCEs as non-profit organizations, government bodies, and individuals. To do this, we must first generalize the value-based ERM approach discussed throughout this book.

Generalizing the Value-Based ERM Approach

The value-based ERM approach can be generalized and applied to any entity. We will discuss five aspects of generalizing the value-based ERM approach:

1. Terminology

2. Objectives

3. Key metrics

4. Risk categorization

5. Framework

Terminology

We will generalize the term value-based ERM in two ways. First, we will change enterprise risk management to entity risk management.1 Second, we will change value-based to objectives-based. Value-based implies a primary objective of increasing company value, which is appropriate for corporate entities, but non-corporate entities (NCEs) usually have other objectives. With this generalized terminology, value-based enterprise risk management becomes a special case of objectives-based entity risk management.

Objectives

With corporate entities, there is a single ...

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