Why might it be in a firm’s best interest to centralize the management of some risks but not others? Describe why the organizational status quo might lead to resistance to ERM implementation. How can this potential resistance be overcome? How do you succeed in making sure that the risk committee really turns into an ERM champion, as opposed to continuing in a silo mentality?
Why might it be in a firm’s best interest to centralize the management of some risks but not others? Describe why the organizational status quo might lead to resistance to ERM implementation. How can this potential resistance be overcome? How do you succeed in making sure that the risk committee really turns into an ERM champion, as opposed to continuing in a silo mentality?
1)Why might it be in a firm’s best interest to centralize the management of some risks but not others?
Sol : If a firm’s best interest to centralize the management of some risks but not others because it is depends on the risks. Some of the risks that need to be centralized are company focus. A company with a single risk group that can communicate and coordinate risks with all other departments in the company has the advantage of showing the big picture of the risks facing the business and its effect on the company. Also, the group has the advantage to bring these risks closer to the senior management who supposed to be responsible for the process.
On the other hand, decentralizing is just like placing the risk responsibility on departments heads or units’ managers. The advantage of decentralization is allowing the people for that unit to be closer to their risks, monitor it, control it, and eventually minimize it or resolve it.
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