Enterprise Risk Management Applications Part 1

There are eight components of Enterprise Risk Management (ERM) that can all be supported by the different methods and tools of Six Sigma Training. This article will cover the first few elements, and will be continued. ERM is the basis used to manage risk throughout an organization, as well as the ability to gain strategic opportunities through having the right amount of risk within any organization. The application of Six Sigma Methodology to this assessment can help any organization to achieve goals and manage risks at the same time, which is essential because these two go hand in hand.

The first factor of ERM is Internal Environment. The behavior and ethics of the process workers greatly impacts their perception of risk management. Also affecting this is their perception of their own authority and responsibility. These values, perceptions, and the overall integrity of process workers are determined by a business vision and the personal examples of leadership.

The culture established within an organization will help to set up employees' receptiveness to change and minimizing risks. The entire goal of Six Sigma Training in this aspect is to keep compliance with risk management and to allow workers to see changes in a positive way. This will allow process improvement to go on without any complications.

Objective Setting is another element of ERM that can benefit from Six Sigma Training and tools. These objectives used to all be financially based, leading to improved performance at the financial and risk expense of the company. However, a new process improvement method has been seen that uses a more realistic measure of performance within an organization. This method involves linking the objectives to the voice of the customer, voice of the business, and the voice of the regulator. There are three categories of objectives to explore when it comes to risk management and supporting enterprise strategy: Operational Objectives, Reporting Objectives, and Compliance Objectives.

Understanding these two basic elements of enterprise risk management, or ERM, is the first step to creating an environment that is friendly and accepting of Six Sigma Training. When a business wants a better chance at achieving more realistic objectives and the ability to use process change in a positive manner for their business, Six Sigma Training can help to create a more positive and receptive environment where change will be welcome rather than being feared. In the end, an environment will exist where everyone understands the equal importance of managing risks and achieving objectives.