Organizations should not only recognize and minimize traditional downside risks, but also embrace upside risks, or opportunities, as a strategy for success. According to a 2005 survey by management consulting firm Booz Allen, 87 percent of the market value lost by large companies with market capitalizations over US $1 billion was the result of strategic and operational blunders. Compliance failure, typically the focus of downside risk, destroyed only 13 percent of market value during the five-year study. Faced with this counter-intuitive finding, companies may wish to pursue a more balanced and positive approach to risk management. Enterprise risk management (ERM) goes beyond mere risk mitigation and compliance--it requires a deep appreciation of upside risks, as well.
Copyright © 2008, Institute of Internal Auditors
Institute of Internal Auditors
Ramamoorti, Sridhar; Watson, Marcia Weidenmier; and Zabel, Mark, "Engineering Value Into Enterprise Risk Management; Six Sigma Techniques Can Improve the Quality of ERM Processes and Enable Organizations to Manage Risks More Successfully" (2008). Accounting Faculty Publications. 87.
Accounting Commons, Business Administration, Management, and Operations Commons, Business Law, Public Responsibility, and Ethics Commons, Corporate Finance Commons, Nonprofit Administration and Management Commons