The concept underlying enterprise risk management (ERM), namely a portfolio view of risk, has been around a long time. The application of this concept emerged in financial institutions and world-class corporate treasuries as they applied at-risk frameworks, capital attribution techniques and other measurement methodologies to the management of market and credit risk.
Many executives struggle to understand the value proposition of ERM. Some executives and directors may even consider ERM a fad or “flavor of the month,” and are just humoring the dialogue, wishing it would go away. What leaves many cold on the subject of ERM is the inability to quickly grasp what it is. This issue of The Bulletin addresses this question.