Enterprise risk management: definitions and understandings

Abstract

Definition of risk management by theorists and practitioners of risk management is systematized based on the research work of scientists, government instructions, data, Internet sites of Insurance and Risk Management Society of US and Canada, Swiss Re International Insurance Group, The Committee of Sponsoring Organizations of the Treadway Commission – COSO, Directive 2009/138/EC Solvency II, documents of the Basel Committee on banking supervision Basel.

Results of the study indicate that both practitioners and theorists of risk management suppose consistent identification of risks, their evaluation, selection and use of methods of risk management according to priority threats as its mandatory elements or stages. A key feature of the integrated enterprise risk management is the responsibility of management at all levels of decision-making with the defining of risk appetite. Management system is viewed based on functional and system approaches within the subject-object interaction.

Scientific approaches mostly concentrated on managing potential threats. The purpose of the integrated risk management as well as theorists and practitioners consider bankruptcy prevention and increasing the value of enterprise. Risk management practitioners distinguish strategic and integrated risk management. This integrated risk management is a structured process of risk management portfolio with the embodiment necessary components such as: organizational support, information-analytical systems, stress testing and methodological support. The key characteristic of strategic risk management is that it is the responsibility of the directors of the capacity to implement the plans and strategy of the enterprise.