Which approach is adopted by enterprise risk management?

Enterprise risk management (ERM) is characterized by its holistic approach to managing risks across the entire organization rather than isolating risk management efforts to individual departments or focusing solely on short-term threats. By adopting an integrated management of risks, ERM enables organizations to identify, assess, and respond to risks in a comprehensive manner that considers the interconnectivity of various risks and their potential impact on the organization's overall objectives.

This integrated approach allows for a more strategic perspective, fostering better communication and collaboration across departments. It aligns the risk management process with the organization's goals and objectives, ultimately leading to more informed decision-making and improved resilience against uncertainties.

In contrast to focusing only on short-term risks, departmental strategies, or mere regulatory compliance, an integrated framework encompasses all dimensions of risk, including operational, financial, strategic, and compliance risks. This broad perspective enhances the organization's ability to manage risks proactively rather than reactively, ensuring sustainable performance and long-term value creation.