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About Strategic & Enterprise Risk Management (SERM)

Strategic & Enterprise Risk Management (SERM) is the merger of both Strategic Risk Management (SRM) and Enterprise Risk Management (ERM).

What is Strategic Risk Management (SRM)?

Strategic Risk Management (“SRM”) is a business discipline that drives deliberation and action
regarding uncertainties and untapped opportunities that affect an organization’s strategy1 and strategy
execution.

SRM represents an important evolution in enterprise risk management, based on the following guiding
principles:

Value-driven: Specifies the foundation and approach for creating, capturing and protecting
enterprise value, while serving as a source of competitive advantage
Reflective: Addresses the unintended consequences and potential exposures arising from, and
created by, operational plans designed to execute strategy
Structured: Evaluates risk and reward trade-offs within the organization’s appetite for risk and
its risk control framework
Informed: Increases risk intelligence and risk-informed decision making with respect to strategic
decisions at the board and executive management level
Dynamic: Recognizes the positive as well as negative impact on enterprise value (e.g. on
earnings, cash flow, capital, reputation and differentiating position) arising from emerging and
dynamic changes in the environment
Process-based: Represents an applied method and process in effective strategic decisionmaking, operational implementation of decisions and responsiveness to industry, economic or
technological changes
Condition-based: Evaluates strategies in the context of significant internal and external
conditions, such as organizational capabilities, environments, forces, events, trends and
stakeholders
Consequential: Prioritizes and manages strategic exposures by relevance, importance and
uncertainty in risk taking as well as mitigating strategic risks2
Interdisciplinary: Encompasses the intersection of strategic planning, risk management and
strategy execution
Scenario-driven: Focuses on the calculation of investment, resource needs and capital allocation
through scenario and stress testing

These guiding principles are captured in the RIMS Strategic Risk Framework.

SRM Graphic Chart

What is Enterprise Risk Management (ERM)?

Enterprise Risk Management (“ERM”) is a strategic business discipline that supports the achievement of an organization’s objectives by addressing the full spectrum of its risks and managing the combined impact of those risks as an interrelated risk portfolio.

ERM represents a significant evolution beyond previous approaches to risk management in that it:

Encompasses all areas of organizational exposure to risk (financial, operational, reporting, compliance, governance, strategic, reputational, etc.);
Prioritizes and manages those exposures as an interrelated risk portfolio rather than as individual “silos”;
Evaluates the risk portfolio in the context of all significant internal and external environments, systems, circumstances, and stakeholders;
Recognizes that individual risks across the organization are interrelated and can create a combined exposure that differs from the sum of the individual risks;
Provides a structured process for the management of all risks, whether those risks are primarily quantitative or qualitative in nature;
Views the effective management of risk as a competitive advantage; and
Seeks to embed risk management as a component in all critical decisions throughout the organization.

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