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"In seven months a worldwide firm, the leader in its field, has seen its reputation destroyed by mistakes
made in just one of its offices. Those who seek to run global businesses should dwell on that and ask themselves
how they can be absolutely sure there is not the equivalent of a Houston office somewhere in their organisation."
Anthony Hilton,
City Editor
London Evening Standard
3rd September 2002
ERA adopts an enterprise wide view of risk. A view that enables the Board of Directors and Senior Management of a Company to
consider all the major risks faced by the Company. An enterprise approach to risk management allows risk to be viewed in a variety of different ways:
- By Region
- By Business Activity
- By Risk Category (operational, credit, market, etc.)
Considering risk in this manner, a Company has the flexibility to take a top down or a bottom up approach. The risk profile for the
Company may be determined by aggregating the different risk classes at divisional, regional and corporate levels.
With respect to risk management, this approach has a number of benefits, including, but not limited to:
RISK FINANCING
By default a Company will finance the risks that it is knowingly, and unknowingly, exposed to. An enterprise-wide
risk management system,which considers all aspects of the Company, will assist in the identification of the risks
faced by the Company. Once the risks have been identified,the Board of Directors and Senior Management can
then decide the most effect approach to managing the risks. In deciding whether to bear, mitigate or transfer the
risks, the Board of Directors and Senior Management are making strategic financing decisions that may have
significant implications for the risk management within the Company.
DECISION TAKING
All companies are faced with a myriad of regulatory and compliance related initiatives, with the Financial Services
Sector under particular scrutiny of late.With different regulatory requirements and different risks arising across a
Company, the ability to view such risk at an enterprise level provides the Board of Directors and Senior
Management with the opportunity for efficient and robust decision-making with regard to its risk management.
RISK MITIGATION
Management and Controls
Risk is mitigated by a Company implementing and maintaining a robust risk management framework,
strategy and internal control environment. An enterprise view of risk across a Company ensures that:
- Risk is identified and logged in a consistent manner;
- Controls are identified and systematically applied in a consistent manner;
- Risk events are consistently captured, analysed and lessons learned;
- Senior Management receives regular and appropriate reports to assist in the decision making
risk management process
ERA can assist companies in identifying and building appropriate frameworks, strategies and control structures.
Risk Financing (Insurance/Captives)
Risk that cannot be managed successfully can be mitigated by passing the risk to others utilising the insurance
and reinsurance markets. Great care needs to be taken to ensure that the insurance products purchased by a company actually match the risks
that have been identified.
ERA can assist companies in ensuring that insurance programmes are appropriately aligned with the risk
exposures identified within their business. We can also advise with regard to the use of Captive Insurance Companies.
Outsourcing
There is no such thing as "cheap" good risk management. Good risk management is an expensive discipline
within any business and may seem to be beyond the reach of many smaller companies. Nevertheless, there is an
expectation that companies will exhibit the use of best practice management techniques regardless of size,
capability or experience.
ERA can assist companies in reducing the costs of risk management by offering an outsourced risk management service to SME businesses.
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