Learning to Share: Big Obstacles for ERM
Standardization, corporate governance pose challenges to enterprisewide view of risk
The touted benefits of enterprisewide risk management, or ERM, are plentiful: It frees up regulatory capital, lowers operational costs, brings transparency to loss exposures, and helps firms avoid defaults and more-efficiently allocate capital, to name a few. But the credit crunch and several well-publicized trading fiascos have prompted many to ask how, and even whether, ERM can be achieved.
Enterprisewide risk management is one of a handful of terms currently in vogue with C-level executives and software vendors specializing in risk. "Integrated risk management typically refers to the integration of credit risk and market risk, while enterprisewide risk management is the integration of all aspects of a firm's financial management," explains Charles Smithson, founding partner of Rutter Associates, a New York-based risk management consultancy. "Holistic risk management is often used interchangeably with integrated risk management."
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