A Risk Management Failure?

The financial crisis resulted from a system-wide failure to embrace appropriate enterprise risk management (ERM) behaviors, rather than a failure of risk management as a business discipline. The assertion comes in an executive report from the Risk and Insurance Management Society (RIMS). RIMS notes that when we look for a cause of the current financial crisis, it is critical to remember that organizations failed to do a number of things:Â  

  • truly adopt an enterprise risk management culture.  

  • embrace and demonstrate appropriate enterprise risk management behaviors, or attributes  

  • develop and reward internal risk management competencies, and  

  • use enterprise risk management to inform management decision-making in both taking and avoiding risks.  

RIMS believes that the 2008 financial crisis is a call to action for enterprise risk management to demonstrate its value, but that to be effective it must fundamentally change the way organizations think about risk. “When enterprise risk management becomes part of the DNA of a company’s culture, the warning signs of a market gone astray cannot go unseen so easily. When every employee is part of a larger risk management process, companies can be much more resilient in the face of risks,† it notes. What do you think?  

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