Enterprise Risk Management

Article Critique: “Enterprise Risk Management in SMEs:

Towards a Structural Model”

Mary Jo M. Morgan

Liberty University

Article Critique: “Enterprise Risk Management in SMEs:

Towards a Structural Model”

Enterprise Risk Management (ERM), which addresses strategic, operations, reporting and compliance objectives, is a process designed to identify potential events that may affect the entity, and manage risk to be within the risk an organization is willing to take in order to achieve its strategic objectives (Gelinas, Dull, & Wheeler, 2015). “Enterprise Risk Management in SMEs: Towards a Structural Model” by Brustbauer (2016), analyses ERM in small and medium-sized enterprises (SMESs) by developing a structural model based on a survey questionnaire.

Ultimately, the article evaluates ERM in terms of approach which affects the strategic orientation, preconditions for ERM implementation, the effect of ERM on business success, and a structural model of ERM in SMEs.

Summary

Risk

The article provides the definition of risk as the probable uncertainty of outcomes stemming from a choice, and a reflecting variation in the distribution of potential outcomes probabilities and subjective values (March & Shapira, 1987).

Enterprise Risk Management (ERM)

ERM evaluates risk from an all risks-encompassing perspective, which identifies, assesses and monitors all threats and opportunities facing a firm. Thus, promoting increased risk management awareness to support the firm-wide approach, and translate the approach into operational and strategic management decisions (Brustbauer, 2016). ERM is about recognizing opportunities during upturns and protecting against risks during downturns (COSO, 2004).

Effects of ERM Approaches on strategic orientation

First, the article presents two approaches which affect the strategic orientation of an organization: a passive approach resulting in a defensive strategy and an active approach resulting in an offensive...