Coming of Age
04 Oct 2006
As Enterprise Risk Management Matures, So Does Its Value In Strategic Planning
In this article from the EDS publication synnovation, Prakash Shimpi from Towers Perrin discusses the value of strategic planning as enterprise risk management matures.
At the most fundamental level, a company is a machine for turning some money into more money.
We’re familiar with the formula: investors provide capital to the organization. Investors take a risk. If all goes according to plan, the investors enjoy a return on their investment.
Clearly, a good capital and risk management strategy is the key to success.
But in truth,many industries still tend to view capital and risk management from a narrow perspective by doing one of the following:managing risk and capital in silos based on business divisions, regions, or products; limiting the breadth of risk to be managed; or focusing too much on certain types of risks (hazard risk,for example) and not enough on other risks,such as competitive marketplace risk or human capital risk.
Having a narrow perspective reflects a number of constraints. Many enterprises, outside of the banking and insurance industries in particular, lack the tools for accurately measuring risk. Often their organizational structures discourage an enterprise-wide perspective, and they continue to focus separately on insurable risks and capital management. In many cases, senior management is reluctant to spend resources and time on an enterprise-wide approach to managing risk when the payback is unclear.
Read the complete article 414K, PDF