Business Risk Management Approach vs. Enterprise Risk Management Approach

Attribute	Business Risk Management Approach	Enterprise Risk Management Approach
Scope	Focuses on managing risks specific to the business operations	Considers risks across the entire organization
Integration	Risk management is often siloed within different departments	Risk management is integrated across all functions and levels of the organization
Strategy	Risk management is often reactive and focused on short-term goals	Risk management is proactive and aligned with long-term strategic objectives
Responsibility	Risk management is typically the responsibility of individual departments or managers	Risk management is the responsibility of the entire organization, with oversight from senior management and the board

Introduction

When it comes to managing risks within an organization, there are two main approaches that are commonly used - Business Risk Management (BRM) and Enterprise Risk Management (ERM). While both approaches aim to identify, assess, and mitigate risks, they differ in their scope and focus. In this article, we will compare the attributes of BRM and ERM to understand their similarities and differences.

Definition

Business Risk Management (BRM) is a more traditional approach to risk management that focuses on managing risks at the business unit level. It involves identifying risks that could impact the achievement of specific business objectives and implementing strategies to mitigate those risks. On the other hand, Enterprise Risk Management (ERM) is a more holistic approach that looks at risks across the entire organization. It considers risks that could affect the organization as a whole and integrates risk management into the organization's overall strategic planning process.

Scope

One of the key differences between BRM and ERM is their scope. BRM typically focuses on risks that are specific to individual business units or projects. It looks at risks such as operational risks, financial risks, and market risks that could impact the performance of a particular business unit. In contrast, ERM takes a broader view and considers risks that could affect the organization as a whole. This includes risks related to the overall business strategy, reputation, compliance, and other enterprise-wide risks.

Integration

Another important difference between BRM and ERM is the level of integration with the organization's strategic planning process. BRM is often seen as a more tactical approach to risk management, with a focus on managing risks at the operational level. It is typically implemented by individual business units or departments and may not always be closely aligned with the organization's overall strategic objectives. On the other hand, ERM is designed to be integrated into the organization's strategic planning process. It considers risks in the context of the organization's overall goals and objectives and seeks to align risk management activities with the organization's strategic priorities.

Responsibility

In terms of responsibility, BRM is often the responsibility of individual business units or departments within the organization. Each business unit is responsible for identifying and managing risks that are specific to their area of operation. This can sometimes lead to silos in risk management, with each business unit focusing on its own risks without considering the broader organizational context. ERM, on the other hand, is typically overseen by a central risk management function or committee that is responsible for coordinating risk management activities across the organization. This helps to ensure a more coordinated and integrated approach to risk management.

Benefits

Both BRM and ERM offer benefits to organizations in terms of managing risks effectively. BRM can be more agile and responsive to risks at the business unit level, allowing for quicker decision-making and action. It also allows business units to take ownership of their risks and develop tailored risk management strategies. On the other hand, ERM provides a more comprehensive view of risks across the organization, helping to identify interdependencies and correlations between risks. It also helps to ensure that risk management activities are aligned with the organization's strategic objectives.

Conclusion

In conclusion, both Business Risk Management (BRM) and Enterprise Risk Management (ERM) are important approaches to managing risks within an organization. While BRM focuses on managing risks at the business unit level and is more tactical in nature, ERM takes a broader view and integrates risk management into the organization's strategic planning process. By understanding the attributes of both approaches, organizations can develop a more comprehensive and effective risk management strategy that addresses risks at both the operational and enterprise levels.