Enterprise Risk Management offers many advantages over traditional risk management. It improves an organization’s strategic decision making by addressing threats and opportunities in a way that integrates risk management with the strategic planning process. ERM is a systemic approach to managing all of an organization’s uncertainty in order to maximize shareholder value by optimizing risk taking.
Traditional risk management considers only hazard and operational risks that can affect an organization. ERM looks at additional risks such as environmental, compliance, financial, and strategic. ERM is not exclusive to the corporate world, but also can be implemented into the sole proprietorship, partnership, government and its institutions, not-for-profit organizations, non-governmental organizations and all other forms of enterprise benefited from integrating ERM with strategy.