ERM - Enterprise Risk Management: Issues and Cases

2 Risk Assessment

In the risk assessment step the enterprise identifies the critical risks to strategy, it analyses and evaluates these critical risks and it prioritizes the critical risks. Risk assessment has been the traditional focus of many risk managers for decades. However, in ERM critical risks include all risks whether operational, competitive, financial, regulatory or from other sources. Finally both positive and negative risks are considered in the context of their criticality as it could affect the strategy.

2.1 RISK QUANTIFICATION: CORNERSTONE FOR RATIONAL RISK MANAGEMENT

Jean-Paul Louisot

Formerly Université Paris 1 Panthéon-Sorbonne, Directeur pédagogique du CARM Institute, Paris, France

Laurent Condamin, Ph.D

Consultant and CEO ELSEWARE¹

Patrick Naim

Consultant and Partner ELSEWARE

Enterprise-wide risk management (ERM) is a key issue for boards of directors worldwide. Its proper implementation ensures transparent governance with all stakeholders' interests integrated into the strategic equation. Furthermore, risk quantification is the cornerstone of effective risk management, at the strategic, tactical, and operational level, covering finance as well as ethics considerations. Both downside and upside risks (threats and opportunities) must be assessed to select the most efficient risk control measures and to set up efficient risk financing mechanisms. Only thus will an optimum return on capital and a reliable protection against bankruptcy be ensured, i.e. long-term ...