Enterprise Risk Management Paper PDF

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Enterprise Risk Management Paper. It discusses enterprise management and involved risks...

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Running head: ENTERPRISE RISK MANAGEMENT

Enterprise Risk Management Paper Name Institutional Affiliation

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ENTERPRISE RISK MANAGEMENT

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Enterprise Risk Management Paper Introduction Enterprise risk management (ERM) is a technique employed by companies to plan, organize, lead, and control its operations for the minimization of the negative impacts of risk on its earnings and capital (Nocco & Stulz, 2006). ERM comprises strategic, operational, financial, and other hazards linked to accidental losses. ERM is a more practical approach for business operations compared to traditional risk management (TRM) methods, and there are several leading factors affecting value-driven ERM, as will be discussed in this paper. Also, this article assesses the application of these value-driven ERM factors in healthcare to impact ERM. Differences between ERM and TRM Organizations using a TRM framework only consider insurable hazards like slippery floors and company equipment and vehicles. In these two scenarios, a company will have workers and liability compensation. ERM mostly addresses non-insurable risks that are nontransferable via insurance in addition to insurable hazards (Hoyt & Liebenberg, 2011). For instance, ERM is more proactive in protecting the organization from external attacks such as data breaches; however, in case such attacks do occur, a company has insurance for helping offset the cost to respond to and address the issue. In addition to these, ERM adopts a more holistic approach to addressing issues in an organization compared to TRM, which departmentalizes or segments issues. For companies using TRM, each department, silo, or business unit addresses its risks, while organizations using ERM's holistic approaches depend on the Board of directors to handle all risks (Hoyt & Liebenberg, 2011).

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Also, TRM uses tactical methods to mitigate losses within a business unit while ERM employs strategic methods to lower risks, provide value/savings, as well as increase sustainability across the organization. Furthermore, as opposed to the management of uncertainties around financial and physical assets associated with TRM approaches, ERM focuses on assessing an organization’s full asset portfolio comprising the proprietary systems, innovative processes, suppliers, employees, customers, and other intangibles. Lastly, in TRM, solutions for risk mitigation is based on each business unit's decisionmaking skills and expertise. On the other hand, ERM solutions for risk mitigation depend on the organization's strategy-setting policies. ERM’s Suitability for Modern Organizations TRM is a reactive approach that has been employed for many years for risk management. Organizations often combine ERM and TRM techniques to help in reducing risks; a combination of these two methods could be potentially costly for an organization because it requires more human and financial resources (Celona, Driver, & Hall, 2011). As a result of cost implications, organizations are turning to ERM for risk management because of its ability to revolutionize conventional approaches and summarize risk management into comprehensive, strategic, and integrated systems, and this is what makes it more effective in addition to the techniques it employs to mitigate current and potential future risks. Thus, ERM has more efficacy because it is more dynamic, suited for distributed organizations, and is more affected in this era of significant data disruption, thus making a company better prepared to handle risks. Drivers/Factors promoting Value-Driven ERM

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A value-driven approach to ERM incorporates progressive probabilistic analysis for quantifying an enterprise's overall uncertainty of its value to identify the risk drivers (Celona, Driver, & Hall, 2011). The main advantage of value-driven ERM is aligning the front-line management, executive team, and the board around well-defined risk management policies that considers evaluates the trade-off between rewards versus risks of the decision-making process. The main factors driving value-driven ERM include consistent evaluation, comprehensive assessment, steady risk appetite, as well as the value factor. First, organizations using value-driven ERM assess their risks comprehensively. They consider all risks that have the potential to impact their operations. Second, companies using this model consistently evaluate all their chances to understand the primary business unit and across enterprise risks and their potential magnitude (Celona, Driver, & Hall, 2011). Also, value-driven ERM is synonymous with a sustained risk appetite, which is applied in all areas of the decisionmaking process to ensure risk-adjusted maximization of shareholder value. Lastly, the value factor in ERM ensures the alignment of risk management to a company's business strategy. The process of aligning risk management sense does not aim at eliminating risks but instead shifting a company's risk-return profile en route for a superior upside through smart risk-taking strategies with the proper exposure in tandem with the shareholder value objectives. Application of Value-driven ERM in Healthcare In healthcare, value-driven ERM drivers can be implemented for safe patient handling. In most healthcare institutions, programs aimed at secure patient handling create and protect value (Haney, Church, & Cockerill, 2013). Such programs make it easier to understand better the potential of the total value using value-driven ERM. Value-driven ERM for healthcare aims at achieving value protection while at the same time creating optimal value for patients, resources,

ENTERPRISE RISK MANAGEMENT employees, and the community. The first step to make this is by understanding value-creation uncertainties and downside, which encompasses the total benefits and total cost of the program. Secondly is the creation of a new alternative to increase the program's overall value by understanding its primary value factors. For a patient safety program, the benefits increased patient and worker satisfaction, reduced falls and injuries and associated costs, reduced turnover cost, and many others. The principal value is this program is reduced turnover. Thus, increasing the value of the program requires more investment in training and communications for nurses on the program's benefits.

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Haney, J. R., Church, J., & Cockerill, R. (2013, October). Pursuing enterprise risk management: A local road map for Canadian healthcare leaders. In Healthcare management forum (Vol. 26, No. 3, pp. 145-149). Sage CA: Los Angeles, CA: SAGE Publications. Celona, J., Driver, J., & Hall, E. (2011). Value‐driven ERM: Making ERM an engine for simultaneous value creation and value protection. Journal of Healthcare Risk Management, 30(4), 15-33. Hoyt, R. E., & Liebenberg, A. P. (2011). The value of enterprise risk management. Journal of risk and insurance, 78(4), 795-822. Nocco, B. W., & Stulz, R. M. (2006). Enterprise risk management: Theory and practice. Journal of applied corporate finance, 18(4), 8-20....