Overview of Enterprise Risk Management

COVID-19 and the effectiveness of ERM frameworks

“…There are also several proposed ERM frameworks available; the COSO (COSO: The Committee of Sponsoring Organizations of the Treadway Commission, 2021) and ISO 31,000 (ISO, 2021) are two well-known examples. This paper separates its discussion points based on Lam’s 7 ERM components (Lam, 2014), which provide a useful high-level categorisation of the important factors in an ERM framework.…”

“…John Lam (2014) cites the separation of the roles and responsibilities of boards versus management as being a key area of ambiguity in practice. He provides the summary in Figure 3, which is a useful reminder to prevent boards from being overly involved in the business whilst at the same time ensuring they play an active role.…”

Basel II and the associated uncertainties for banking practices

“…The risk control office, as a recently recognized business unit in banks, has achieved a relatively high position in the organizational hierarchy of banks, as well as exclusivity from lower administrative units, for example, the accounting department (Mikes, 2009). The risk control office achieves this status because of its scientific classification and its association with sophisticated technologies (Lam, 2003; Power, 1992). Moreover, the literature recommends that management appoint chief risk officers to head the risk control office (Aebi et al , 2012; Beasley et al , 2005; Hall et al , 2015; Lam, 2003).…”

“…The risk control office achieves this status because of its scientific classification and its association with sophisticated technologies (Lam, 2003; Power, 1992). Moreover, the literature recommends that management appoint chief risk officers to head the risk control office (Aebi et al , 2012; Beasley et al , 2005; Hall et al , 2015; Lam, 2003).…”

“…Another benefit is that the information provided gives management the power to exercise control over operational decisions (Simon, 1997) from a distance (Robson, 1992). Although the risk control office is independent from bank operations, because of its proximity to management, it should be useful to management in strategic and operational decisions (Aebi et al , 2012; Lam, 2003; Mikes, 2011; Williamson, 1975). Greater control of risk can improve the overall alignment between strategy and operations (Woods, 2009).…”