![]() ![]() Limitations with Traditional Approaches to Risk Management This traditional approach to risk management is often referred to as silo or stove-pipe risk management whereby each silo leader is responsible for managing risks within their silo as shown in Figure 1 below.įigure 1 – Traditional Approach to Risk Management Each of these functional leaders is charged with managing risks related to their key areas of responsibility. For example, the Chief Technology Officer (CTO) is responsible for managing risks related to the organization’s information technology (IT) operations, the Treasurer is responsible for managing risks related to financing and cash flow, the Chief Operating Officer is responsible for managing production and distribution, and the Chief Marketing Officer is responsible for sales and customer relationships, and so on. Traditionally, organizations manage risks by placing responsibilities on business unit leaders to manage risks within their areas of responsibility. Instead, proponents of ERM are suggesting that there may be benefits from thinking differently about how the enterprise manages risks affecting the business. Calls for entities to embrace enterprise risk management aren’t suggesting that organizations haven’t been managing risks. So, if risk management is already occurring in these organizations, what’s the point of “enterprise risk management” (also known as “ERM”)? Let’s Start by Looking at Traditional Risk Managementīusiness leaders manage risks as part of their day-to-day tasks as they have done for decades. ![]() In fact, most would say that managing risks is just a normal part of running a business. ![]() Leaders of organizations must manage risks in order for the entity to stay in business. ![]()
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