Creating Value by Integrating Risk Management with Capital Management and Overall Business Strategy
Joan Lamm-Tennant, PhD, Global Chief Economist and Risk Strategist
David Lightfoot, CPA, Head of Analytics, Asia Pacific
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Introduction
Enterprise Risk Management (ERM) enables an organization to integrate its risk management strategy with its capital and business strategies, ultimately improving the linkage between operational and financial decision making. ERM consists of four elements: identifying and managing critical risks; quantifying the impact of these risks on capital adequacy and earnings, setting risk appetite and tolerance, and embedding risk management into the strategic decision-making process. Several studies have shown that firms with stable results consistently create more value for stakeholders than those with volatile results.
