**3. Elements of a robust risk management framework**

Generally speaking, a robust risk management framework tackles five dimensions [9]:


316 Risk Management – Current Issues and Challenges

Fuelled by increasing competition, more stringent regulations and higher levels of interconnection amongst different players, the marketplace is becoming more and more complex. Concerned with such trend, financial institutions have realized that if they want to survive, they need to rely on a robust risk management framework, given by corporate

Since 2008, financial markets have experienced sharp declines. [3-5]. Analyzing several consumer surveys allows us to conclude that consumers, particularly those who have been severely affected by the crisis, would rather have opted for higher levels of prevention and anticipation, supported by management schemes with enough level of risk management considerations. The aforementioned risk management considerations are playing a greater role in companies' overall strategy and strategic choices. Indeed, companies are increasingly realizing the need of relying on strong risk governance and a sophisticated hedging program. This trend is largely explained due to the fact that these are seen as essential elements of a robust financial risk management program that will help them secure

In the last years ERM has been gaining momentum as a new concept, a new trend, a MUST HAVE. But perhaps in the midst of everyone rushing-up to implement it, it is worth stopping for a second in order to understand its meaning and ask ourselves … is it really

ERM stands for Enterprise Risk Management but its real origin is unclear. Some associate the birth of this concept to the definition of the Integrated Risk Framework by the Committee of Sponsoring Organizations (COSO) back in September 2004. Others believe that the starting point was in the 1970s when most of the Management theories arised. Being factual it would even be valid the mindset that it is a concept that has been in place since the beginning of times, when the Romans traded goods with the Carthagians. So if we agree that companies have managed risk forever the question here is what can Enterprises do better to manage Risk? Or what have been the best practices in risk management that

Anyone involved in line management makes risk based decisions on a daily basis. The desire of such decision makers would be to count on a reliable crystal ball that would allow

Far from being the aforementioned magic tool, going down the road of ERM involves setting a structured approach or a reference framework to manage risk at companies. As of today, many companies have already understood the value proposition and experienced its benefits – which mainly tackle improved controls, better communications and decisionmaking, and a common language for risks. [7]. Nevertheless, for other companies the concern is still there: is there significant justification for an ERM program? Would the company really make different decisions if it did have an ERM program? According to some

organizational policies and supported by sophisticated IT systems and technology.

resilience to the economic problems affecting the marketplace.

**2.1. To what extent is ERM a "New" concept?** 

companies have pursued to achieve recognized success?

them to opt for the choices that would derive profit maximization.

something new?


### **3.1. Corporate governance = Positive risk culture**

Relying on strong corporate governance that diffuses a positive risk culture from the top to the bottom of the organization is an imperative to set up a robust risk management framework. Unless the employees of a firm are aligned and somehow willing to contribute towards improving risk management at their workplace, the organization will not be able to manage risk appropriately. The whole organization, from the last employee to the most powerful member of the Board of Directors should see some benefits in managing risk, and as long as this happens, a positive risk culture can be promoted across the overall organization.

From another angle, a positive risk culture can also be understood as that which is characterized by individual accountability, creativity, transparency and honesty. As long as employees understand the importance of accomplishing the organization's risk management approach, have a clear view of what such policies mean and believe they are transparent and honest, they will feel more creative and a healthy attitude of constant challenging of decisions and ideas will arise from them towards improvement the management of risk at their workplace.
