Empowered Enterprise Risk Management

CHAPTER 12Concluding Remarks

THE FATE OF AN enterprise risk management (ERM) programme is decided early on. It can take one of two main paths with very different destinations. If path one is followed, ERM becomes but an island, an isolated process that achieves little more than delivering a list of the firm's currently known risks to the board of directors who quickly check it off the agenda. If the other path is followed, ERM ends up becoming a force for change that brings about knowledge and behaviours that make a real difference to decision‐making.

Choosing the second path will unlock ERM's full potential. In this case, ERM is arguably not a control function. The goal is instead to help generate better business decisions and increase firm value. As soon as value is accepted as the goal, the logical consequence is to always strive for the optimal balance between risk and return, which is a very different perspective from just keeping risks in check. In this empowered version of ERM, managing risk is elevated to something akin to a core value, something that is simply expected of all employees at all times.

There is a bargain involved, however. For this second path to be taken, executives must want to take it. If one thing is clear, it is that ERM cannot get off the ground unless the executive team is fully behind it. The bargain is that if they endorse it and commit the necessary resources, all the benefit of an empowered ERM stands a chance of materializing. There are many ...