CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management
Kaveri Pharma Ltd's board finds that each department maintains its own risk list, with no common risk language, no aggregate view and no link to strategic goals. The Company Secretary recommends moving to enterprise risk management. What is the key change ERM brings compared with the present silo approach?
ERM replaces fragmented departmental risk lists with an integrated, entity-wide portfolio view aligned to strategic objectives and the board's risk appetite. This lets the company see aggregated and interrelated risks with common language, instead of isolated silos managed independently by each department.
- ARisks are assessed only by the internal auditor once a year
- BRisks are managed in an integrated, entity-wide portfolio view aligned to objectives and risk appetiteCorrect
- CRisk management is outsourced entirely to the insurer
- DOnly financial risks are retained and operational risks are dropped
Explanation
ERM takes a holistic, entity-wide view, considering risks across functions together, against objectives and risk appetite. The silo approach fails to aggregate risks. Limiting the exercise to financial risks or to the auditor does not provide integration.
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