Enterprise risk management (ERM)

Introduction

As risk management becomes increasingly important to organizations of all types, business leaders must understand the key drivers of value-driven enterprise risk management (ERM). These key drivers guide the decision-making process regarding risk identification, assessment, and mitigation. In this essay, we’ll explore each of these drivers in detail.

Explain the difference between traditional and enterprise risk management.

There are two primary types of risk management: traditional and enterprise risk management. Traditional risk management is the approach that has been used for many years. It focuses on managing risks to individual entities, such as businesses or departments. This type of risk management is often reactive, meaning that risks are identified and managed after they have occurred. Enterprise risk management is a more recent development and takes a more holistic approach to risk management. It considers all aspects of an organization, including its people, processes, systems, and environment. Enterprise risk management is proactive, meaning that risks are identified and managed before they have a chance to cause harm (Shad et al., 2019).

Why enterprise risk management is a more effective approach for today’s organizations.

Enterprise risk management (ERM) is a critical framework for managing risk in today’s business environment. It is an approach that goes beyond the traditional risk management practices of identifying, assessing, and mitigating risks. The benefits of ERM include improved decision-making, increased transparency and accountability, and better risk identification and mitigation. In addition, ERM can help organizations realize their strategic objectives by aligning risk management with business goals. ERM is particularly important in the healthcare sector, where providers are increasingly held accountable for the quality and cost of care. Key drivers of value-driven enterprise risk management in health care include patient safety, quality of care, financial performance, and compliance with regulatory requirements (Fraser et al., 2021).

Key Drivers of Value-Driven ERM

To understand how enterprise risk management (ERM) can be value-driven, it is important first to understand the key drivers of value. Four primary drivers of value can be used to guide the implementation of ERM in any organization:

1. Financial Performance: The ability to generate profitable and sustainable financial performance is essential for any organization. ERM can help identify and manage risks that could impact financial performance, including revenue, expenses, and capital (Fraser et al., 2021).
2. Strategic Alignment: A well-aligned business strategy is critical for success. ERM can help ensure that strategic objectives are considered in identifying and managing risk.
3. Customer Satisfaction: Satisfied customers are essential for a successful business. ERM can help to identify and mitigate risks that could impact customer satisfaction, including risks related to products and services, data security, and customer service.
4. Regulatory Compliance: Compliance with applicable regulations is critical for organizations in all industries. ERM can help to ensure that risk management activities are aligned with regulatory requirements and that compliance is achieved (Fraser et al., 2021).

How Are These Key Drivers Applied in Health Care?

As with any business, the healthcare sector is constantly trying to find ways to reduce expenses while increasing revenue. This often requires a complex balancing act, as any decision made in one area can have unintended consequences in another.

Healthcare organizations must carefully weigh the risks and rewards of all their decisions, using enterprise risk management to help them make informed choices. Some key drivers of value-driven ERM include safety, quality, efficiency, and equity. For example, improving patient safety can lead to increased revenue from safer hospitals and reduced expenses from fewer malpractice lawsuits. Likewise, increasing the quality of care can lead to increased patient satisfaction and more referrals from happy customers. Improving efficiency can reduce labor costs, and enhancing equity can help attract more patients from diverse populations (Garbuio & Lin, 2018).

Examples of Successful ERM Efforts in the Health Care Industry

There are several examples of successful Enterprise Risk Management (ERM) initiatives in the healthcare industry. One of the most prominent is the development of Innovative Acute Care Models (IACMs) by Kaiser Permanente. This program was designed to reduce emergency department visits, inpatient admissions, and readmissions. To achieve this goal, Kaiser Permanente implemented various initiatives such as real-time risk assessment, telemonitoring programs, and patient education interventions (Garbuio & Lin, 2018).

Another example is using analytics to reduce healthcare-associated infections (HAIs). This effort involves analyzing trends in HAIs such as Clostridium difficile infection (CDI), Methicillin-resistant Staphylococcus aureus (MRSA), and Vancomycin-resistant enterococci (VRE). By analyzing these trends, hospitals can identify areas in which they can focus their efforts to reduce HAIs. These are just two examples of successful ERM efforts that have been used in the healthcare industry. Other organizations have also succeeded with ERM initiatives such as supply chain management, clinical trials management, and financial risk management (Garbuio & Lin, 2018).

Benefits of Value-Driven ERM for Health Care Organizations

Value-driven ERM is proving to be especially beneficial for healthcare organizations, where avoiding risks can be a matter of life and death. By taking an active role in managing enterprise risks, healthcare organizations can improve patient safety, cost efficiency, and quality of care. These are just a few of the ways value-driven ERM helps healthcare organizations:

1. Patient Safety: ERM helps organizations understand the potential risks that may affect patient safety and then develop strategies for minimizing those risks.
2. Cost Efficiency: ERM can help identify areas where organizations are overspending or inefficiently using resources, then create processes to reduce costs associated with those areas.
3. Quality Of Care: ERM enables organizations to identify potential operational or medical errors that could affect patient outcomes and then create processes for preventing them from occurring in the future. This leads to improved quality of care for patients (Shad et al., 2019).

Conclusion

In short, risk management is a critical process for organizations and should be viewed as a key strategic initiative. Risk management aims to identify potential risks and develop a plan to mitigate those risks. The key drivers of value-driven ERM are risk identification, risk assessment, risk response, and risk monitoring and review. These drivers are essential for healthcare organizations because they help to ensure that the organization is proactively managing risks and that risk management is integrated into all aspects of the organization.

References

Fraser, J. R. S., Quail, R., & Simkins, B. (2021). Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives (Robert W. Kolb Series) (2nd ed.). Wiley.

Garbuio, M., & Lin, N. (2018). Artificial Intelligence as a Growth Engine for Health Care Startups: Emerging Business Models. California Management Review, 61(2), 59–83. https://doi.org/10.1177/0008125618811931

Shad, M. K., Lai, F. W., Fatt, C. L., Klemeš, J. J., & Bokhari, A. (2019). Integrating sustainability reporting into enterprise risk management and its relationship with business performance: A conceptual framework. Journal of Cleaner Production, 208, 415–425. https://doi.org/10.1016/j.jclepro.2018.10.120

Spanò, R., & Zagaria, C. (2022). Enterprise Risk Management Systems: Emerging Issues and Future Trends. Integrating Performance Management and Enterprise Risk Management Systems, 35–68. https://doi.org/10.1108/978-1-80117-151-920221003

CLICK HERE TO ORDER A PLAGIARISM-FREE PAPER

Enterprise risk management (ERM)

Write a 1,050- to 1,400-word paper about enterprise risk management (ERM) in which you:
 Explain the difference between traditional and enterprise risk management.
 Explain why enterprise risk management is a more effective approach for today's organizations.
 Explain key drivers of value-driven enterprise risk management.
 Explain how these key drivers are applied within health care to drive enterprise risk management.
Provide examples.
Cite at least 3 outside sources.
Format your paper according to APA guidelines.