Running Head: HRM 1

Human Resource Management

Name and Number of Student

Date of Submission
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Difference between Traditional and Enterprise Risk Management

There are various specific differences exists among the traditional and enterprise risk
management. For example, traditional risks are considered moveable risks so these risks are
related to accidental & financial risks. In contrast, Enterprise Risks are not transferable like
traditional risks so these applicable to operational & strategic risks. Moreover, in order to
manage and control traditional risks, an individual requires accounting skills, knowledge and
abilities (Lam, 2014). On the other hand, enterprise risk management needs innovation, strategic
planning and marketing skills. The following given table clearly shows the key differences such
as:
Traditional Risk Management (TRM) Enterprise Risk Management (ERM)
TRM strategies are applied to target individual Such methodologies are utilized to mark
risk dangerous risk
Danger bounds Hazard plan
In TRM, danger is measured as an separate In ERM, risk is a major part of strategy
danger
The process of TRM is include different steps It considers several steps including risk
such as: risk identification, risk analysis and portfolio development, risk
risk reduction optimization

Enterprise Risk Management as an Effective Approach

It is true that, in the present time of globalization, Enterprise risk management is
considered one of the best and effective approaches for today’s organization. It is because it
offers specific methods, practices, ways and processes to organizations that can be utilized to
manage different types of risks successfully and grab significant opportunities connected to the
attainment of their strategic business objectives. On the other hand, ERM is also assists the
organizations in managing a number of management functions related to planning, leading,
organizing, and controlling (Brain, N. & Rene, S. (2006)..
Simply, it can be said that, ERM play key role in minimizing the effects of risks on a
company’s earnings and capital. Moreover, it is also important to know that, ERM is also allows
a particular organization or a company to manage different types of risks affective company’s
ability to attain its key goals and objectives. For example, ERM is used by the organization as a
plan based strategy to address, assess, identify and prepare for any hazards and risks. Moreover,
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the following given below are the main reasons that make ERM an effective approach to
organization such as:
 Enhance Operational effectiveness & efficiency
 Improve organizitnal ability to respond risks quickly
 Improve confidence level of organizational people toward the fulfillment of strategic
goals of the company (Crouhy, Galai, & Mark, 2005).
 Reduce operational costs, improve risk response decisions, enhance data quality, improve
risk reporting, minimize intricacy, change the risk culture etc.
 Enhance regulatory, legal and reporting necessities (Epetimehin, 2014).
 Facilitate decision making to attain strategic objectives and plans
 Helps the organizations to deal with unpredictable business environment
 Includes specific processes that protect organisations and improve value
Key Drivers of Value-Driven Enterprise Risk Management
Generally, there are eight major or key drivers of value driven enterprise risk
management such as:

Risk Management Strategy: According to this, it is important to a particular company or

organization to pay attention on selecting its risk management approaches, priorities, and risk
governance structure, priorities before adopting risk management concepts on the basis of its
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business size, models and complexity. It means risk management methodology of an

organisation must include valuation of the needed competences and roles of risk management,
internal control-related functions, compliance etc (Segal, 2011).
Risk Ownership: Risk ownership should be allocated frequently to an individual accountable for
implementing the risk responses. Moreover, the head of risk management function should be
coordinate, communicate and manage the risk management activities, polices and strategies in
order to ensure the documentation and extenuation of material risks by the suitable risk owners.
Risk Management Competency: This driver indicates that, individuals of a company should be
categorized into four major groups such as:
 Responsible for managing risks
 Charge of risk governance (Leggio, 2006).
 Assigned the task of executing risk responses and
 Those checking and recording the effectiveness of risk responses
Moreover, such people should have suitable and appropriate skills, knowledge,
experience so that they can be able to understand their roles and functions effectively and
successfully.
Decision-Making: This driver suggests that, the risk management determinations should be
focus on the post decision implementation risks. Moreover, risk management must be applied to
the decision making process by understanding each and every thing.
Day-to-Day Operations: According to this driver, a risk management should include an
effective reporting structure, systematic processes, implementation of business plan,
communication of polices, training etc. in day to day operations (Leggio, 2006).
Ongoing Monitoring: Based on the business size, model, polices and complexity of the
organization, related second line defense functions and regulatory requirements should be
established for the ongoing monitoring of actual performance.
Periodic Monitoring: The organization should pay attention on internal audit with needed
resources for the purpose of periodic monitoring (Segal, 2011).
Culture and Board Oversight: Finally, it is important for an organization to focus on
developing effective and appropriate risk culture for the effective risk management.
Applications of Key Drivers of Value-Driven Enterprise Risk Management in Healthcare
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All the eight key drivers of value-Driven Enterprise Risk Management can be applied and
used in healthcare environment in order to improve health care outcomes and patient satisfaction
level effectively and successfully. For example, risk management strategy can be used by the
healthcare professional in order to select the risk management approaches, methods and
priorities. This risk management strategy could help the healthcare professionals in enhancing
the internal control related functions and acquiescence effectively and successfully. On the other
hand, the concepts of risk ownership can be applied to execute the risk response immediately.
The responsible individual can be able to manage risk management practices in healthcare
environment effectively (Epetimehin, 2014). Along with this, decision making driver could be
used to enhance decision making related to risk by understanding the risk in the environment.
The healthcare organization can also use day to day operation driver to enhance its reporting
systems & structures. But this is only possible through open and effective communication.
Simply, this key driver should be used to bring innovation and development in day to day
operations. Ongoing monitoring as a key driver can also be applied in the healthcare
environment in order to understand actual performance against the desired. Culture and Board
Oversight is the last driver that could be used to make the risk culture effective and appropriate
(Crouhy, Galai, & Mark, 2005).
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References
Epetimehin, P.F.M. (2014). The Role of Enterprise Risk Management in Health Systems
Development. IOSR Journal of Business and Management (IOSR-JBM), 16(9), 47-50.
Crouhy, M, Galai, D. & Mark, R (2005). Risk Management. New York, McGraw-Hill.
Brain, N. & Rene, S. (2006). Enterprise risk management: theory and practice. Journal of
Applied Corporate finance, 18 (14), 8-20.
Lam, J. (2014). Enterprise Risk Management: From Incentives to Controls. USA: John Wiley &
Sons.
Segal, S. (2011). Corporate Value of Enterprise Risk Management: The Next Step in Business
Management. USA: John Wiley & Sons.
Leggio, K.B. (2006). Managing Enterprise Risk: What the Electric Industry Experience Implies
for Contemporary Business. UK: Elsevier.