journal features

why ERM versus traditional risk management

the journal of Michael Werneburg

twenty-eight years and a million words

Toronto, 2015.10.24

I'm studying for a course on risk financing, and have a quibble with an answer "in the book". The course is "Risk Financing", coded as the ARM's #56. The question, in the Course Guide, reads:

"Explain why an organization may decide to manage its business risk using an enterprise risk management (ERM) approach."

Off the top of my head, I wrote:

"A holistic approach to risk management synthesizes hazard risk with risk to the achievement of business objectives, and highlights the cumulative risks that arise from their intersection and multiplication. This broadened approach allows better design of risk control, and brings risk awareness to all areas in the organization where decisions are made."

The answer from the Course Guide says:

"An organization may decide to manage its business risks by using an ERM approach to maximize shareholder value."

I'm guessing this was written by an MBA or possibly an accountant, not a ERM practitioner.

rand()m quote

The man who lies to himself and listens to his own lie comes to such a pass that he cannot distinguish the truth within him, or around him, and so loses all respect for himself and for others. And having no respect he ceases to love, and in order to occupy and distract himself without love he gives way to passions and coarse pleasures, and sinks to bestiality in his vices, all from continual lying to other men and to himself.

—Fyodor Dostoevsky, The Brothers Karamazov