Enterprise risk management (ERM)

Definition

Enterprise risk management (ERM) in plain English

Enterprise risk management (ERM) is a company looking at ALL the ways things could go wrong at once — not each department worrying in its own bubble. Think of a ship's captain checking the weather, the engine, the crew, and the cargo together, because a small leak plus a storm is far worse than either alone. Companies care because risks interact: a supply problem, a lawsuit, and a data breach can pile up. ERM is the single framework for spotting these threats, sizing them up, and deciding which to avoid, reduce, insure, or accept.

Related Principles of Finance terms

• Agency bond
• American option
• Arbitrage pricing theory (APT)
• Asset-backed security (ABS)
• Basis risk
• Bid-ask spread
• Bookrunner
• Carhart four-factor model
• Clientele effect
• Collateralized debt obligation (CDO)