Enterprise Risk Management Model

Enterprize Risk Management Review Process:

Identify potential events or situations that could occur within a subsystem in the absence of controls.
Categorize risks based on their impact areas: people, mission, physical assets, financial assets, and customer/stakeholder trust.

Assess the likelihood and impact of identified risks.
Rate risks based on their probability of occurrence and the potential impact they could have.

Evaluate existing controls that mitigate identified risks.
List all controls that would naturally exist in the subsystem without specific controls.

Identify additional controls needed to effectively manage and mitigate risks.
Highlight gaps between existing risks and current controls, especially for risks with significant or extreme ratings.

Document the results of the risk evaluation in a structured risk registry.
Include details such as identified events, probabilities, impacts, and the strategy for risk management.
Ensure clarity and transparency in the documentation to facilitate understanding and decision-making.

Risk Identification and Analysis:

For each subsystem, senior level staff and subject matter experts typically engage in the following processes:

Identify potential events or situations that could go wrong within the subsystem.
Consider impacts on people (employees, stakeholders), mission (core objectives), physical assets (equipment, facilities), financial assets (budgets, investments), and customer/stakeholder trust.
Include risks that could be missed opportunities for enhancing effectiveness and efficiency.

Assess the subsystem within the context of existing external controls or safeguards.
Evaluate the likelihood (probability) and impact of specific risks if no specific controls were in place.
Determine the potential consequences to the subsystem and broader organizational goals if these risks were to materialize.

Requirements Identification

Requirements Identification:
Evaluate existing controls that are already in place across the organization.
List all controls that are applicable and effective without specific subsystem-specific controls.
Ensure that these controls address general risks that could affect multiple subsystems or the organization as a whole.
Controls Identification:
Identify additional controls needed to manage and mitigate specific risks identified in the subsystem.
Focus on gaps between existing risks and the controls currently in place.
Prioritize actions based on the severity of risks (significant or extreme risk ratings).
Refer to existing external controls and industry standards as a basis for developing new controls whenever feasible.
The Risk Registry is a detailed record that documents: For each risk, the registry outlines options for handling it:
Identified risks within a system or organization,
Existing controls currently in place,
Proposed new controls to fill any significant gaps between existing controls and identified risks.

Enterprise Risk Management (ERM) is crucial for several reasons:

Integrated Strategy: ERM aligns with the organization's strategy and management principles. It ensures that managing risks is integral to achieving the department's mission effectively.
Consistency: ERM provides a systematic approach to decision-making and operations. This consistency helps in establishing and implementing requirements, ensuring accountability across the organization.
Better Communication: ERM establishes clear frameworks for articulating processes used in program execution and governance. This clarity enhances communication within the organization and with external stakeholders.
Clear Performance Measures: By implementing ERM, organizations can improve efficiency and maintain consistent messaging to contractors, customers, and stakeholders. This consistency builds trust and enhances the organization's reputation.

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