Enterprise Risk Management (ERM):

Although enterprise risk management is important to avoid potential threats that will affect the well being of a company, it is sometimes hard to quantify. The idea may seem simple, but there are many ways one can reduce risk through the use of insurance, forwards, options, and contracts. So, which one is the most effective/optimal way to reduce the uncertainty?
It depends on the company under consideration. What works for one company, may not satisfy the risk tolerance for a similar company. According to the Risk and Insurance Management Society (RIMS), “ERM is a comprehensive view of risk from both operational and strategic perspectives and is a process that supports the reduction of uncertainty and promotes the exploitation of opportunities.”
Once a business is established for a few years then it should consider investing in some type of risk management. For smaller start up business’s risk management will be harder to target, since they may not have finances to use effective risk management tools. Considering that most new business’s success depends heavily on how it does in the first year, they may not be able to benefit from their investment in risk management. There may also be some mismanagement in the first year, because a new business owner may not know what to expect in the first year.


Links:
http://en.wikipedia.org/wiki/Enterprise_risk_management