ERM Concepts [17]

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Bullet points include: Risk benefits or harms different stakeholders differently. Traders may benefit from upside of risky positions but not personally suffer losses. Equity-holders may have limited liability. Debt holders and regulators/governments/industry wide protection arrangements may lose if firm suffers large losses. Often focus is on principals trying to control agents (‘agency problems’). Non-academic way of describing these issues is corporate governance. Cadbury report: ‘corporate governance is the system by which businesses are directed and controlled’. ERM is part of this framework, e.g. Walker Review

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