Good ERM programs enhance company value through reduced costs, decreased variability in financial results, enhanced market reputation, and improved business decision-making. KPMG believes it’s possible to quantifiably measure the value that ERM delivers. While there is no one, magic equation to figure this out, some common approaches for valuing ERM programs or program components include:
1) Assessing capital costs
2) Assessing total compliance program costs
3) Assessing hedging or insurance costs
4) Identifying the flip side of risk or the investment opportunities for each risk
5) Identifying avoided losses from the industry or company risk events
6) Assessing earnings variability before and after risk mitigation
