Enterprise Risk Management
Categories: Company Management, Regulations
Risk management means preparing for bad things that could happen. Carrying an umbrella when it's cloudy. Having car insurance. Stocking your basement panic room with cans of cream of mushroom soup, in case you have to wait out a radioactive apocalypse. That kind of thing.
Enterprise risk management takes this concept to the corporate level. Companies use ERM techniques to identify things that could go wrong and prepare for them.
Run a soda manufacturing company heavily dependent on the cost of corn syrup? Use the options market to hedge the price of corn. Manage a thoroughbred greyhound stable where one wrong footfall could force you to send a million-dollar investment to the glue factory? Take out the appropriate insurance.
Those types of preventative maneuvers represent enterprise risk management.