What is a key difference between Traditional Risk Management (TRM) and Enterprise Risk Management (ERM)?

The distinction between Traditional Risk Management (TRM) and Enterprise Risk Management (ERM) is significantly marked by the cross-functional nature of ERM. ERM takes a holistic approach to risk management, integrating various aspects of risk across the entire organization, whereas TRM often emphasizes isolated risks related to specific departments or functions. This cross-functional approach in ERM enables organizations to recognize that risks can be interconnected and have broader impacts on the whole organization rather than just on individual segments. Consequently, ERM fosters collaboration among different departments, promoting communication and a unified strategy for identifying and managing risks.

Additionally, ERM encompasses not only the identification of risks but also their assessment and mitigation at an enterprise-wide level, allowing for a more thorough understanding of how risks affect the organization as a whole. This comprehensive involvement across various departments and functions is a pivotal feature that differentiates ERM from the more siloed approach of TRM.