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What Is Enterprise Risk Management?
Enterprise risk management (ERM) is a constantly evolving field but remains focused on identifying and minimizing risks that companies face. These risks might be specific to an industry (for example, HIPAA compliance in the healthcare field) or those faced by virtually every organization in the 21st century, such as cyber threats.
An enterprise risk management framework is a tool that can help a company identify, list, and rank potential risks to specific parts of the organization. See below for more information and an example.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is a joint initiative of five private-sector organizations dedicated to offering thought leadership through the cultivation of frameworks and guidance on enterprise risk management, internal control, and fraud deterrence. These organizations include the following:
- American Accounting Association
- Financial Executives International (FEI) Institute of Internal Auditors
- American Institute of CPAs
- Association of Accountants and Financial Professionals in Business
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Why do enterprises need risk management?
To succeed financially and otherwise, an enterprise needs to be aware of potential risks that could affect security, reputation, profits, operations, and more. An enterprise that ignores risks and the ways to mitigate them could potentially face catastrophic consequences.
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