This document provides an overview of enterprise risk management. It defines risk and risk management as processes for minimizing unfavorable outcomes at the lowest cost. Enterprise risk management is a common framework that identifies potential risks and manages opportunities to reasonably achieve organizational objectives. It also describes the components of an effective risk management organization, including infrastructure, planning, implementation, control, and maximizing firm value. Key components of risk management are identified as event identification and risk assessment, risk response, information and communication, monitoring, and control activities. An example is provided of risks that led to the bankruptcy of Baring Bank.

1. Entreprise Risk Management
Compiled by
Boga Khurairi C1K011007
Ilham Perwira Putra C1K011013
Sridanti Firdamila N C1K011020
Mega Noer Azizah C1K011042
Nur Zahroh Hamidah C1K011045

2. RISK MANAGEMENT CONCEPT
RISK
The process of minimizing the probability and severity of an
unfavorable outcome at the lowest long-term cost to the
organization.
RISK MANAGEMENT
Risk management is the process of minimizing the probability and
severity of an unfavorable outcome at the lowest long-term cost to
the organization.

3. Enterprise Risk Management
(ERM)
Enterprise Risk Management is a common
framework applied by business management and
other personnel to identify potential events that
may affect the enterprise, manage the associated
risks and opportunities and provide reasonable
assurance that our Company’s objectives will be
achieved

4. RISK MANAGEMENT ORGANIZATION
Risk management organization is a system of
management of risks faced by the Organization in a
comprehensive manner for the purpose of increasing the
value of the company.
Organizational risk management aims at creating a system
or mechanism within the Organization so that the risk can
be detrimental to the organization can be anticipated and
managed for the purpose of increasing the value of the
company.

5. Organizational Risk Management
Framework
Soft infrastructure:
Risk culture
Management support
Hard Infratucture:
Information technology
Other infrastructure
Process of Organizational Risk
Management
1. PLANING:
Goal and mission setting
Target and decision procedure setting
2. IMPLEMENTATIO N:
Identification and measurement of risk
Risk management, assurance, diversificat ion
avoidance
Organizational risk management: organ ization
structure, staffing, incentive, .
3. CONTROL:
Evaluation, report, communication, feedback
MAXIMALIZE FIRM VALUE

6. COMPONENT OF RISK MANAGEMENT

7. Components of Risk Management
Event Identification & Risk Assessment:
As part of the strategic planning process and day-to-day
management of the business, functional leaders identify internal
and external events that may affect the achievement of our
Company’s objectives .Risk management function personnel help
identify and assess these risks through their expertise, formal
assessments and analysis of business intelligence and trends.

8. Cont’
Risk Response:
A response is determined based upon the overall risk exposure,
considered as a function of likelihood and impact of the
occurrence .Risk responses may include avoiding or evading,
accepting, reducing, and sharing or transferring risk.

9. Cont’
Information & Communication:
Information and communication channels are in place to
make the organization aware of risks that fall into their area
of responsibility and expected behavior and actions to
mitigate negative outcomes .

10. Con’t
Monitoring:
Management reviews, as well as assurance activities, such as
testing, auditing and assessments, are in place to ensure that
risks are effectively identified and assessed, and that
appropriate responses, controls and preventive actions are in
place .

11. Cont’
Control Activities:
Control activities are established to ensure that risk
responses are carried out effectively and consistently
throughout the organization .This involves formalizing risk
response in our Company policies, ensuring clear
accountability, utilizing self-assessment and monitoring tools
and designing controls into our systems and critical business
processes

12. Example

13. Baring Bank trader (Nick Lesson) buy Japanese stock
derivative instruments (Futures Nikkei). Baring Bank was the
bank of England. Japanese economy decrease in drastic due
to the Kobe earthquake disaster. As a result he suffered
heavy losses. The next transaction (sell option) increasingly
aggravating losses. In the end suffer losses of Baring Bank
$1.3 billion. Baring Bank was forced to go bankrupt because
its losses exceed capital

14. THANK YOU 