Enterprise risk management helps a business identify, assess, and respond to risks in a coordinated way. It matters because risks can arise across the whole organization, change over time, and affect owners, workers, customers, and other stakeholders.
Enterprise risk management (ERM) is an integrated, cross-disciplinary approach to monitoring and managing risks throughout an organization. Rather than handling each risk in isolation, ERM brings information together so decision-makers can see how risks interact and affect the venture as a whole.
All flashcards
What is enterprise risk management (ERM)?
An integrated approach to identifying, assessing, and managing risks across an organization.
What factors inform a venture’s risk appetite?
Its existing risk profile, risk capacity, risk tolerance, and management’s risk attitude.
How can a personal guarantee affect an owner?
It may make the signing owner personally responsible for a business obligation if the business cannot pay.
What is financial risk for a venture?
The possibility that the business will not have enough money to sustain its operations.
How does business insurance help manage risk?
It spreads potential losses across policyholders and may cover specified losses under the policy’s terms.
Quiz questions
What is a tort in the context of business legal risk?Answer: A civil wrong that can cause harm and lead to legal responsibility.
A corporation cannot pay a loan that its owner personally guaranteed. What may happen?Answer: The owner who signed may have to repay the guaranteed obligation personally.
What type of coverage may address claims involving professional mistakes or negligence?Answer: Errors and omissions insurance.
A business accepts payment cards online. Which standard should it understand and follow to protect cardholder data?Answer: Payment Card Industry Data Security Standard (PCI DSS).
Why should a small business make backup copies of important data?Answer: Backups can help restore information after a cyber incident.
Based on Entrepreneurship by Michael Laverty, Chris Littel (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.