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Underwood, A. and Ingram, D. (2010)The Fabric of ERMhere

Introdction (partial)

"If enterprise Risk management (ERM) is what it claims to be, then it is at its core the discipline of managing risk across an entire enterprise. But there are many different types of enterprises, from the pin-striped financial world to the tough, blue denim collars of manufacturing. Banks believe they invented ERM, as the antidote to their out-of-control trading desks. Insurers see risk management as their birth-right — but the underwriters and actuaries whose uneasy truce defines the sector have very different ideas of what risk management means. Long-lived firms in other business sectors are comfortable that their own approach to risk is all that is needed. Basel II/III, Solvency II and COSO/ISO31000 are the fundamentally inconsistent roadmaps to these divergent approaches. And to the enduring consternation of disciples of each of these styles of ERM, a number of firms flaunt the dictates of all three, yet continue to survive and sometimes thrive. From this tangle, we can identify four distinct approaches to the management of enterprise-wide risk. These four ERM strategies can be called Diversification, Loss Controlling, Risk Trading and Risk Steering. We will consider each of these in turn, demonstrating that each represents a complete management system, with its own sensible way to accomplish different goals."


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