What distinguishes Enterprise Risk Management (ERM) from Traditional Risk Management (TRM)?

Enterprise Risk Management (ERM) is distinguished from Traditional Risk Management (TRM) through its broader perspective and efficiency in addressing potential risks.

ERM takes a holistic approach by considering risks across the entire organization rather than focusing only on isolated incidents or risks within individual departments. This comprehensive view allows for a better understanding of how different risks interconnect and how they might impact the organization as a whole. By incorporating various types of risks—strategic, operational, financial, and compliance—within one framework, ERM facilitates more informed decision-making and strategic planning.

Furthermore, this integrated approach enables organizations to prioritize risks based on their potential impact and likelihood, thereby optimizing resource allocation toward mitigation efforts. By viewing risks collectively, organizations can implement more effective risk management strategies that align with their overall goals and objectives.

In contrast, Traditional Risk Management typically emphasizes specific risks, often leading to a segmented analysis and management of risks, which may overlook the broader implications and connections between various risk factors.