Enterprise Risk Management (ERM) has become a buzz word in many industries, yet the concept is still rather mysterious. Depending upon the definition of risk, or the definition of risk management, the approach differs.

To break down ERM into a simplified outline, we begin with the definition of risk:

• Risk is typically thought of as encountering a loss, danger
  or hazard
• Risk is the deviation from what is expected; the effect of its uncertainty on objectives
• Risk includes looking at the upside, or consideration of what can provide opportunity

Insurance companies practice risk management and encourage or even require their client to implement all kinds of risk management programs. These include claims management, loss control, and litigation management. These are more of a "rear view mirror" approach. When adding the element of proactive risk management, we turn to a more "forward looking approach."

Due to the nature of risk, we must continually look at risk from different perspectives, and with a wider lens. ERM provides a more holistic view of risk, utilizing both the rear view mirror and the windshield view. By looking at risk from a bigger picture perspective, you can more clearly see how risks and response plans involve more than just the department/silo they currently work in.

Historically, the evolution of ERM began with the root of risk management. Today, Enterprise Risk Management has become the vehicle as to how an organization decides to respond to its risks, both the upside and the downside.

For more information, contact your local Eide Bailly representative.

Mary Peter, director of enterprise risk management, was featured in
Let's Talk, a quarterly publication distributed to insurance companies nationwide. "Enterprise Risk Management - Insurance Companies Do That, Right?" was published in the 2014 first quarter edition.  

Reprinted with permission by Swift Print Communications.