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Enterprise Risk Management Essay

1034 words - 5 pages

Article Critique: “Enterprise Risk Management in SMEs:
Towards a Structural Model”
Mary Jo M. Morgan
Liberty University

Article Critique: “Enterprise Risk Management in SMEs:
Towards a Structural Model”
Enterprise Risk Management (ERM), which addresses strategic, operations, reporting and compliance objectives, is a process designed to identify potential events that may affect the entity, and manage risk to be within the risk an organization is willing to take in order to achieve its strategic objectives (Gelinas, Dull, & Wheeler, 2015). “Enterprise Risk Management in SMEs: Towards a Structural Model” by Brustbauer (2016), analyses ERM in small and medium-sized enterprises ...view middle of the document...

The strategic orientation will derive from the applied approach and its effects.
Preconditions for ERM implementation
Secondly, the article proposes the firm size, sector and ownership structure as the preconditions for ERM implementation; and concludes that larger firms are more likely to implement ERM than smaller ones, regulated industries such, as financial industry, are at the forefront of ERM implementation, and that the ERM will be successful with strong owners who are aware of its values.
Effects of ERM on business success
Thirdly, the article concludes on three elements of strategic orientation in terms of the effects of ERM on business success: market expansion, product introduction and production and process technologies investments. Thus presents positive effects on competitiveness and success.
Structural model of ERM in SMEs
Finally, the article develops a structural model based on a postal questionnaire sent to firms in Austria along three dimensions - risk identification, risk assessment and risk monitoring (COSO, 2004) - to analyze the ERM in SMEs. The results are given in terms of the applied ERM approaches and the preconditions for ERM implementation.
In conclusion, the article states that SMEs key to success is to be aware of firm-related risks, which is the prerequisite for ERM implementation. The perception of risks and the ability for a firm to manage them will determine the risk-management approach implemented.
Critical Analysis
The article respectively studied how the ERM approach adopted or applied will affect the strategic orientation of an organization, presented the essentials that constitute the conditions for implementing ERM, how ERM affects business competitiveness and success; and explored, using the structural model, the correlation between the elements studied.
First of all, the article explored a theoretical back ground on the definition of risk and found that risk is a complex concept in such that, some entrepreneurs consider risky option as one with a wide range of possible outcomes; thus uncertainty related to positive outcomes is not an important factor in risk. But the concept of risk is much more complex than evaluated by the article because fraud risk will eventually be detrimental to an organization.
(the article defined and explained the concepts of Risk and Enterprise Risk Management through a collection of literatures, providing theoretical background. The...

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