“Against the background of an ever tougher risk environment and growing demands from investors, regulators and rating agencies, PricewaterhouseCoopers says that many insurers and other financial services organisations are asking questions about the effectiveness of enterprise risk management and its ability to deliver a return on investment or meet the expectations of stakeholders.”

The article is worth reading.  One of the key points made is:

“…the study found that enterprise risk management is, in many cases, neither relevant to nor clearly understood by business teams. It is not fully embedded into strategic decisions and its integration into day-to-day decision making and frontline risk taking within many insurance companies remains limited, potentially undermining its ability to deal with a more complex risk environment and more exacting stakeholder expectations”

This article mainly addresses ERM within financial institutions.  These companies have a very real need for ERM, especially with a broad range of exposures to interest rates, natural disasters, and general economic turmoil.

That said, the takeaways apply to all business enterprises.  In essence, ERM adoption can be held back due to it’s complexity and the inability of current practitioners to properly teach the marketplace about its proper use.  Many look to Enterprise Risk Management as a holy grail that will lead to zero losses, and soaring profits.  Unfortunately, this ideal can be quite damaging, especially for those expecting quick results and not fully realizing the amount of work and effort that is actually necessary to make real, lasting change.

Since the topic of Enterprise Risk Management can be quite overwhelming, it’s important that practitioners work to translate it’s implementation into actionable items that can be performed by individuals with no prior experience.   By doing so, everyone in an enterprise can be involved and take ownership in the process, helping create a risk management culture, rather than a dictatorial risk management approach that almost always fails.