Enterprise Risk Management or ERM enables the organizations to pragmatically deal with uncertainty and associated risk and opportunity thus enhancing the brand value and profitability. Enterprise risk management helps in identifying and selecting among alternative risk responses – risk avoidance, reduction, transfer, and acceptance. It helps to ensure effective reporting and compliance with laws and regulations, and avoid damage to the entity’s reputation and associated consequences.
Succeeding in the establishment of this process will ensure that risks taken by a financial institution are compensated by a level of reward and the firm is completely aware of the amount of risk that it wants to take on. An integrated model helps in delivering tangible benefits in terms of costs associated with compliance and gives a better picture of the risk being faced by the bank.