Upfront: Why You Need ERM

Strategic benefits make enterprise risk management worth the effort.

In a June white paper, the International Federation of Risk and Insurance Management Associations Inc. notes that enterprise risk management (ERM) is an essential component of organizations' strategic planning. The report recommends that companies position a risk professional high in their organizational structure to ensure the success of their ERM program. "It is time to get risk professionals in charge of mitigating the risks they are trained to identify," says Susan Meltzer, the organization's president, "and thereby leverage opportunities that benefit the whole of the company."

The report says that a comprehensive, integrated approach to risk management can add value to the company by:

• Contributing to overall business objectives. ERM helps companies choose risks and capitalize on opportunities.
• Enhancing corporate governance. ERM programs can promote risk consciousness throughout the organization and enable the company to provide comprehensive reporting to shareholders and regulators.
• Protecting against catastrophes. Maintaining the right level of risk requires consideration of internal and external risk factors and a focus on risk mitigation through insurance, hedging and other instruments.