Enterprise Risk and Opportunity Management

Chapter 3Overview of EROM Process and Analysis Approach

This chapter discusses some of the main processes and analysis activities that are involved in conducting EROM in coordination with organizational planning, plan implementation, and organizational evaluation of performance. The topics include the basic principles for deriving organizational objectives hierarchies; developing risk and opportunity information for each objective; understanding risk tolerance and opportunity appetite; composing enterprise risk and opportunity scenario statements; identifying corresponding risk and opportunity leading indicators, including leading indicators for unknown and underappreciated (UU) risks; correlating strategic success likelihoods with leading indicator values; rating the likelihood of success for the various goals and objectives; and identifying/evaluating various options for mitigating risk, availing opportunity, and setting up internal controls. More complete guidance on setting up an internal control structure that is integrated with EROM will be provided in Chapter 10.

3.1 Organizational Objectives Hierarchies

3.1.1 Objectives Hierarchies for Each Management Unit

Although the particulars of the management structures of TRIO enterprises tend to vary from one organization to another, the process of developing objectives hierarchies for each management unit tends to be uniform. It consists of identifying the unit's top objectives, which tend to be mandated by the entities that ...