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ERM concepts and Risk categorisation [18]

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Bullet points include: ERM should give an enterprise-wide risk picture, including Risks, risk concentrations and risk diversifications But having a full picture can be very costly and complex to achieve Often involves major multi-year change programmes and IT spend Proponents argue that gains in reduced losses and reduced volatility more than outweigh these costs. Examples from Lam (2003) include: Large P&C insurer saved $40m or 13% of annual reinsurance premium Top money centre bank that focused on ERM out-performed S&P 500 banks by 58% in stock price performance. See also Farrell and Gallagher (2014) who analysed risk maturity

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