engleski

ENTERPRISE RISK MANAGEMENT – VALUE BASED APPROACH TO MANAGING CORPORATE RISKS HOLISTICALLY

Risk management is an important element of an efficient and comprehensive corporate governance system. Recently, there is a growing awareness of the importance and role of the risk management function, as evidenced by the growing number of organizations seeking to integrate the risk management process into their organizational culture and management systems. With increasing complexity and uncertainty new opportunities and threats are constantly emerging, which can significantly affect the company's operations. This chapter analyses the importance of implementing an integrated risk management system known as enterprise risk management (ERM), which provides significant competitive advantages and contributes to business goals, better management, and growing company value. The main objective of the chapter is to explain the characteristics of the ERM system and its advantages over traditional risk management (TRM) that is based on the assessment and management of individual risks, and does not consider the correlations between different types of risk and the overall company’s risk exposure. The chapter offers a detailed view of the ERM process implementation based on eight dimensions (1) The internal environment (2) The objective setting (3) Risk/Event identification (4) Risk assessment (5) Risk response (6) Control activities (7) Information and communication and (8) Monitoring and continuous improvement. By exploring the existing ERM literature, 46 indicators of a mature and efficient ERM system have been recognised, which presents further development of the ERM index portrayed in Miloš Sprčić et al. (2015) . The third objective is to present the impact of ERM on the company value creation. A conceptual framework is developed which explores the relationship between ERM and the fundamental value drivers of a company aiming to build the risk management theory by providing a better understanding of how ERM works within a company.

Enterprise Risk Management, Company's Value, ERM Index, ERM process

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