Enterprise Risk Management (ERM)
What does ERM stand for in healthcare compliance?
In regard to healthcare compliance, ERM is an abbreviation that stands for Enterprise Risk Management.
What is Enterprise Risk Management (ERM)?
Managing risks is part of operating any organization, company, business, or firm. Enterprise risk management (ERM) is a top-down process by which an organization, company, business, or firm identifies, analyzes, and prepares for risks that may harm the finances, goals, or operations.
Enterprise risk management is a bit different from the traditional risk management approach. Traditional risk management requires specialists to manage each different singular type of risk, while ERM looks at the interdependency of various risks. With traditional risk management, there’s a series of limitations that can be detrimental. These limitations include the inability to deal with risks that fall in between risk areas, difficulty dealing with risks that include multiple areas, not being able to understand how one risk area might affect another risk area, dealing with internal risks primarily as opposed to focussing on both internal and external risks, and struggling to prepare for new risks that might arise.
Enterprise risk management deals with these limitations by considering the potential dependency of one risk upon another. In other words, enterprise risk management can see how one risk might affect another potential risk. Enterprise risk management focuses on oversight of all risks (especially the most significant ones) to meet the goals of the organization.
According to North Carolina State University, a few elements are necessary for successful enterprise risk management. The elements are as follows:
- Risk assessment
- Risk identification
- Risk response
- Strategy and objective setting
The main objectives of ERM are to discover the greatest risks to the organization, company, business, or firm and to evaluate the way in which the risks are managed. It is through the use of the key elements listed above that these goals are met.
There are many benefits to ERM. One benefit, as previously explained, is the fact that enterprise risk management focuses on all risks, no matter what area or level. ERM also creates a better viewpoint on risk by analyzing the effects of certain risks and improving the system as a result. Another benefit is that ERM allows for better standardization regarding risk reporting. Additionally, enterprise risk management provides tools that allow risk management functions to be performed with ease and consistency. And finally, compliance and regulation are easily coordinated through enterprise risk management.
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