The understanding and management of risk by financial institutions, banks, and entities, has improved over the years. Today, stakeholders are more involved, and they demand greater transparency regarding the risks of a company and how the company reacts and plans the future to take advantage of further chances.
Enterprise-Wide Risk Assessment (EWRA) or simply Enterprise Risk Assessment (ERA) or Overall Risk Assessment or Enterprise Risk Management (ERM) are all terms that describe the same process: the identification, appraisal and supervision of risks of an entity. An assessment helps businesses to adapt their approach of managing risks to meet the demands of the evolving financial corporate standards.
Enterprise-Wide Risk Assessment (EWRA) or simply Enterprise Risk Assessment (ERA) or Overall Risk Assessment or Enterprise Risk Management (ERM) are all terms that describe the same process: the identification, appraisal and supervision of risks of an entity. An assessment helps businesses to adapt their approach of managing risks to meet the demands of the evolving financial corporate standards.
💰 Why Financial Institutions conduct overall risk assessments?
Using ERM programs is a way for companies to gain a competitive advantage. It is not solely pursuant to a regulatory obligation. Understanding which areas of a business are the most exposed to risks is a way for entities to take preventive measures, prioritise actions and protect their business from unforeseen hazards.Getting insights on how risks are spotted, addressed and managed is often decisive for the risk acceptance alignment of the upper-management and board members' oversight function.
ERM plays a fundamental role in the prioritisation of the risks (i.e. governance, operational, reputational, strategic, financial, regulatory) and hence it can be considered an essential step in the overall business strategy and company performance. Risk assessment assists companies to grasp business opportunities in changing environments.
👩💼 EWRA and the Risk-Based Approach (RBA)
Risk-based approach (RBA) is an essential part of Risk Management. RBA was highlighted especially for money laundering risks (AML/CTF) in the 2012 FATF Recommendations:“...countries should apply a risk-based approach (RBA) to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the risks identified.” and was also a major concern implemented in the fourth European AML Directive.
