Running Head: ERM 1 ERM 10 Research Paper Draft ITS835 – Enterprise Risk Management Dr. Jerry Alsay University of the Cumberlands Introduction Risk can be explained as a combination of diverse things or activities that a person, a group or organization is doing knowing that they might experience hardships and have knowledge on what they expect but do it anyway since there is a possibility of success. Risk management is a process that assist the organizations to comprehend what are the risk they are anticipating, who might experience the risk, what are the possible control for the risk and making a conclusion on whether these control are adequate or are they not adequate. Enterprise risk management is explained as the process of organizing, planning, controlling and leading the actions of an enterprise for them to reduce the impacts of risks on the enterprise earnings and capital. The enterprise risk management comprises of strategic, operational and financial risk connected to the accidental losses. Recently, there have been external factors that has encouraged organizations to implement the use of ERM. Government regulatory and industries have started scrutinizing organizations risk management procedures and policies and a rising number of industries, BOD are needed to evaluate and report the relevance of risk management processes in the companies they facilitate. Organizations might gain by transforming the corporate culture to focus more on overall risk minimization from the aim of meeting IT obligations. Most of the organizations have discovered that ERM has the ability to offer new competitive advantage which has made most organizations to implement ERM. ERM is one of the major achievement that most of the organizations are striving to implement. This paper will focus on discussing the background understanding of ERM, the advantages of ERM and the implementation of ERM in organizations. Background There exist diverse ways in which most organization respond to hazards and some doubt the utilization of ERM. However, there are some organization that currently understand the importance of implementing ERM to their organizations. Just like other transformation processes happening inside an organizations, ERM offers an opportunity for the financial and management accounting professional to change how they are viewed by other companies (Waseem et al., 2017). Through becoming a strategic partner with the ERM adoption, the company can see the “bean sprouters” of the new administrative initiative other than just “bean counters.” When organizations implement ERM they can transform from just being the custodians and historians of accounts to becoming futuristic thinkers. Organizations can transform and become couches as well as players in the new management initiative necessary to the future of the company well-being. When adopting a good ERM based system inside an organization, technology participates a v.

1. Running Head: ERM 1
ERM 10
Research Paper Draft
ITS835 – Enterprise Risk Management
Dr. Jerry Alsay
University of the Cumberlands

2. Introduction
Risk can be explained as a combination of diverse things or
activities that a person, a group or organization is doing
knowing that they might experience hardships and have
knowledge on what they expect but do it anyway since there is a
possibility of success. Risk management is a process that assist
the organizations to comprehend what are the risk they are
anticipating, who might experience the risk, what are the
possible control for the risk and making a conclusion on
whether these control are adequate or are they not adequate.
Enterprise risk management is explained as the process of
organizing, planning, controlling and leading the actions of an
enterprise for them to reduce the impacts of risks on the
enterprise earnings and capital. The enterprise risk management
comprises of strategic, operational and financial risk connected
to the accidental losses. Recently, there have been external
factors that has encouraged organizations to implement the use
of ERM. Government regulatory and industries have started
scrutinizing organizations risk management procedures and
policies and a rising number of industries, BOD are needed to
evaluate and report the relevance of risk management processes
in the companies they facilitate.
Organizations might gain by transforming the corporate culture
to focus more on overall risk minimization from the aim of
meeting IT obligations. Most of the organizations have
discovered that ERM has the ability to offer new competitive
advantage which has made most organizations to implement
ERM. ERM is one of the major achievement that most of the

3. organizations are striving to implement. This paper will focus
on discussing the background understanding of ERM, the
advantages of ERM and the implementation of ERM in
organizations.
Background
There exist diverse ways in which most organization respond to
hazards and some doubt the utilization of ERM. However, there
are some organization that currently understand the importance
of implementing ERM to their organizations. Just like other
transformation processes happening inside an organizations,
ERM offers an opportunity for the financial and management
accounting professional to change how they are viewed by other
companies (Waseem et al., 2017). Through becoming a strategic
partner with the ERM adoption, the company can see the “bean
sprouters” of the new administrative initiative other than just
“bean counters.” When organizations implement ERM they can
transform from just being the custodians and historians of
accounts to becoming futuristic thinkers. Organizations can
transform and become couches as well as players in the new
management initiative necessary to the future of the company
well-being.
When adopting a good ERM based system inside an
organization, technology participates a very significant role
since it is always the most essential component for companies
to run effectively and successfully. Technology assist in the
provision of timely information that assist in the identification,
response and analysis of risk. The transformations inside an
organization and the technology transformation are what
triggers the auditors to realize as well as monitor the effects of
risk management (Khan & Ali, 2017). Advanced technology is
the best asset for any organization that is working on managing
risks.
There are diverse strategies an organization can implement to
handle risk. The first method to handle organization risk is
avoidance; organization should try and avoid the activities that
might cause risk to the company. The other strategy is that the

4. organization can utilize the minimization process to minimize
the effects of hazards. The other strategy is by utilizing
alternative action that might reduce the associated risks. The
organization can also focus on securing their properties which
will assist them to reduce the amount of risk occurrence. Using
ERM the organization is in a position to realize risks and decide
if they are worth try or if they should avoid the risk (Oliva,
2016).
There are diverse processes connected to enterprise risk
management procedure. The first process is known as the
context establishment. Context establishment needs the
organization comprehending the present conditions of where
they operate (Yılmaz & Flouris, 2017). The organization needs
to understand the micro and macro environment so that it can
realize the impact of a certain risk. The second process is the
identification of risks that are a danger to the organization. The
company should identify all those risk that have a probability of
hindering progress and growth of the organization.
The third one is that the company should analyze risk that are
connected with the company. It is the duty of the organization
at this step to calibrate any material risk and create the possible
result of risk along with the company risks. The other process
that ERM incorporates is the exploitation of the organization
risks (Kaya, 2018). The organization come up with diverse
strategies that can assist the management of risks connected to
the company. The final process of the ERM is the observation of
risk environment as well as the determination of performance of
implemented risk management plans.
The different types of risks that hinder success of an
organization include the strategic risk, compliance risk,
reputation risk, operational risk and financial risk. Various
occurrence lead to the strategic risk like the technological
changes as well as powerful competitors getting to the market
or shifting of the clients wants. Compliance incorporates risks
that are connected to states laws and regulations. The
organization will undergo the compliance risk when it enlarge

5. its enterprise activities to other nations.
The operation risk is the most unanticipated failure of a
company (Cohen et al., 2017). Operational risk might be caused
by technical failures like the employee recording wrong amount
on the check. Financial risk has a great economic effect on the
organization. This risk affects the business financial flows.
There is a huge probability that a huge amount of debt might
raise the financial risk of a company, which can reduce the
growth of the organization. Reputational risk occurs when the
organization reputation is damaged. When the organization
status is damaged it might lead to loss of customers which in
turn leads to the reduction of revenue for the organization.
The diverse challenges that organization might experience when
adopting ERM are; the organization might find it hard to use
ERM. The organization quantifies the risks, and this might
increase issues concerning risk distribution to the macro
regulators. It is the duty of the top management to balance the
risk visibility in a company. The other challenge include the
risk to create continuous risk taxonomy. Risk taxonomy is the
inconsistencies which threaten the organization strategies, goals
and objectives.
The other challenge is if one should utilize the quantitative or
the qualitative approach to create critical decisions for the
company. This means there is need for analytical support to
minimize the adoption cost of risk resolution (Brown et al.,
2019). The other challenge that the enterprise risk management
implementation has is time horizon based on the company’s
desire to put focus on the risk management. The last challenge
is the ownership which forms dispute in the company’s
management board.
Problem Statement
ERM is an important procedure of the company that recognizes
a methodological way of handling risks. This researcher paper
will explain the method for risk reduction or mitigation of risks
utilizing the enterprise risk management as discussed by several
authors. This paper will also offer ways in which organization

6. might handle the dangers presented by different type of risks.
ERM sometimes face challenges when it comes to
implementation in some organizations, this paper will offer
proper guidelines on the procedure of implementing ERM in the
organizations.
Some organizations do not understand the importance of using
ERM, this paper will offer explanations of the importance of
ERM in the organization, and it will also explain what will be
different if the organization decide to use ERM to handle their
risks. Some organization are also not aware of the emerging
risks that they might experience in the future, however, this
paper will offer information on how the implementation of ERM
help organization realize risks and plan on how to handle them.
Literature Review
Alwi, S., Razak, S. E. A., Aslam, S. N. A. M., Basir, I. N., &
Salleh, M. N. M. (2019). Explain that enterprise risk
management is a set of activities utilized to impact the
organization management of the risk that affect the whole
organization. The author explain that ERM is the best method to
use since it covers all the risks in a business not only the
discrete risk in the internal part of the business but also those
that affect the business externally. Brown, J., Duane, M., &
Schuermann, T. (2019), explain that risk management affect
most of the current organization since they do not handle it in
the right way. The article also add on this by explaining how
most organization have failed to manage their risk since they do
not follow the procedures needed for implementing risk which
result to them facing diverse challenges like time horizon based
on the company’s desire to put focus on the risk management.
According to Oliva, F. L. (2016) article, enterprise risk
management is mostly an issue in most of the current
organizations. The article explains the diversity of what most
organizations believe about ERM. The author explains that there
is an increasingly competition that is brought by organizations
that implement the use of ERM. There are some importance that

7. the author explain for using ERM such as the preparation of
risk, risk mitigation and risk reduction. Companies that use
ERM are not comparable to those that do not use ERM, there is
a great difference when it comes to performance.
Waseem-Ul-Hameed, F. H., Ali, M., & Arif, M. (2017), explain
that the level of risk management adoption is the main element
in the prosperity of ERM. Most organization fail to apply the
risk management procedures which cause their risk management
not to perform as well as expected to mitigate the expected
risks. It is importance that organizations understand the need of
applying the risk management procedure to ensure that ERM is
successful in their organization. The author offers ways of
developing a better ERM system through solving the issue of
risk management application.
According to Brustbauer, J. (2016), there are some
preconditions that one should follow for the implementation of
ERM. According to the author most small enterprises either use
active or the passive ERM method, that which impact the
organization strategic orientation. The passive ERM approach is
the approach is a defensive strategy while the active approach is
referred to as the offensive method. There is need that
organization utilize these two methods depending on the type of
market they are dealing with. These methods help the
organizations to realize the best method that they can use to
adopt to the changing environment and the risk presented with
the changing environment. Yılmaz, A. K., & Flouris, T. (2017),
supports thes analysis by explaining how most business use the
holistic and the tailored methodology to run their business.
According to the author different organizations will need a
different method to handle their risk, however, it is best that the
organizations utilizes the ERM method as their way of
managing risk since it has proved to be a successful methods.
Cohen, J., Krishnamoorthy, G., & Wright, A. (2017), explain
the impact of ERM in the financial reporting processes.
According to the authors, the current financial crisis happening
in most organization has presented the need for organization to

8. manage and handle their risk one approach that most
organizations have supported is the use of enterprise risk
management. The link amid ERM and financial reporting’s of
organizations is important since the financial reporting show the
financial position and the connected risk of the organization as
identified by the enterprise risk management.
Kaya, İ. (2018). According to this author, the utilization of
ERM is important in the organization since it offers the
organization closure to identifying the possible risks and how to
mitigate the risks. The author explains how risk affects the
business financial flows. There is a huge probability that a huge
amount of debt might raise the financial risk of a company,
which can reduce the growth of the organization. ERM help
realize the financial risks and help the organization avoid these
risks or mitigate the financial risk after the occurrence.
The article written by Khan, S. N., & Ali, E. I. E. (2017)
explains how using ERM is beneficial to organizations. The
article explain how in the recent years most institutions have
reported advancement due to the utilization of ERM framework
in managing the different type of risks. ERM is known to be the
most adminrable way to handle risk in the current era. Through
moderating the function of intellectual capital in connection
between firm performance and ERM one can realize that the
difference is brought in by the use of ERM. Firms that have
more intellectual capital are in a position to tackle the impacts
of the unanticipated transformation in markets and economies.
To achieve best performance organizations have adopted the use
of ERM.
Discussion
All organizations include the SMEs should implement the use of
ERM. ERM has a lot of advantages to the business than the
challenges that it might face. The challenges that organizations
face after the implementation of ERM are mostly as a result of
failure to follow the right procedure for risk management. If the
organization follow the risk procedure then there will be no
disadvantages since they will be in a position to realize the risk

9. and weigh them to see if they are valuable or they should be
avoided (Alwi et al., 2019). Not all risk should be avoided some
risk are worth the try and that is why ERM is important to
realize if the risk are worthy or not. When adopting a good
ERM based system inside an organization, technology
participates a very significant role since it is always the most
essential component for companies to run effectively and
successfully.
When organizations implement ERM they can transform from
just being the custodians and historians of accounts to becoming
futuristic thinkers. Organizations can transform and become
couches as well as players in the new management initiative
necessary to the future of the company well-being. Technology
assist in the provision of timely information that assist in the
identification, response and analysis of risk. The different types
of risks that hinder success of an organization include the
strategic risk, compliance risk, reputation risk, operational risk
and financial risk (Brustbauer, 2016).
There are diverse strategies an organization can implement to
handle risk. The first method to handle organization risk is
avoidance; organization should try and avoid the activities that
might cause risk to the company (Vij, 2019). There are some
preconditions that one should follow for the implementation of
ERM. According to the author most small enterprises either use
active or the passive ERM method, that which impact the
organization strategic orientation. The passive ERM approach is
the approach is a defensive strategy while the active approach is
referred to as the offensive method.
References
Alwi, S., Razak, S. E. A., Aslam, S. N. A. M., Basir, I. N., &
Salleh, M. N. M. (2019). Enterprise Risk Management and

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Brustbauer, J. (2016). Enterprise risk management in SMEs:
Towards a structural model. International Small Business
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Brown, J., Duane, M., & Schuermann, T. (2019). What is
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Cohen, J., Krishnamoorthy, G., & Wright, A. (2017). Enterprise
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