As senior executives look for additional ways to increase shareholder value, they've begun to take a different approach in establishing how shareholder value is linked to risk management.
Many of them are beginning to recognise that risk is not just confined to a variety of negative outcomes that should be avoided, but also includes identifying and exploiting opportunities. This article illustrates how enterprise wide risk management has evolved over the last few years and emphasises how organisations can benefit from adopting it.
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Risk on its own is not always a bad thing. But misunderstood or poorly managed risk is not a good sign. Many organisations are beginning to accept that risk creates opportunities which in turn create shareholder value.
One key question that senior management should be asking themselves is "how do we manage the organisation's risks to create value for our shareholders?"
Enterprise wide risk management (EWRM) has become an essential part of doing business in the 21st century. It's a structured process that seeks to align an organisation's business strategies, human resources, processes, information technology and intellectual capital. It aims to evaluate and manage the internal and external uncertainty that confronts an organisation as it creates shareholder value.
"Enterprise wide" simply means that it's an integrated, holistic & forward looking approach. Traditional "silo", functional, divisional barriers are removed so that opportunities are identified and exploited and that key business risks are managed to help senior management optimise an organisation's key resources and to maximise shareholder value.
Senior executives are faced with a range of new challenges in their quest to increase shareholder value. Enterprise wide risk management must now extend beyond traditional boundaries. Globalised markets, the internet and ecommerce, increasing customer demands and the pace of modern business are changing rapidly & senior management needs to constantly address new risks.
Organisations are able to use EWRM to gain competitive advantage. By identifying risks across the entire organisation, senior executives are able to manage and prioritise risks and link them to creating shareholder value.
But many senior management remain unclear on how they can start to translate the EWRM concept into processes that will enable them to create and increase shareholder value. EWRM may be great in theory. But senior management will only see its true value when they use information about their risks as a catalyst to drive better business performance and enhance shareholder value.
EWRM provides organisations with a disciplined, structured approach to help achieve their key business objectives, return on investment & drive even greater shareholder value. Visionary companies are now beginning to embrace enterprise risk management as a powerful business tool.
Using Enterprise Wide Risk Management To Gain Competitive Advantage
Mark Gwilliam, FCCA, uses his international experience to coach small business owners on how to run successful businesses. He combines his natural enthusiasm for sharing his knowledge with his proven ability to provide practical down-to-earth solutions for his clients. He has written several books and owns several companies which offer small business owners integrated business solutions. He writes several business articles in his weekly newsletters "The Bizness" and "Successful Marketing Strategies". To read these and to have access to more tools and resources to turbo charge your business, visit his sites at http://www.mark-gwilliam.com and http://www.themarketingdude.com
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