ERM: The Importance of Aligning Management of Risk Objectives and Risk Management Processes

by Robert N. Charette

To create an effective enterprise risk management process -- one where risks are going to be managed as a system -- you need to have both your enterprise management of risk strategy and your risk management processes in alignment. The management of risk strategy determines the course of action you want to pursue in relationship to your risk/reward appetite; your risk management processes determine how well you can manage on a day-to-day basis the risky decisions that come along with pursuing the course of action you have embarked upon. What is happening at two of the world's leading companies -- Toyota and Boeing -- demonstrates what happens when they start to become misaligned.