Discuss briefly the Enterprise Risk Management (ERM). Explain the components derived from the way management runs an enterprise and are integrated with the management process.

The Enterprise Risk Management is an integrated Framework which is one of the most widely recognized and applied enterprise risk management frameworks in the world. It provides a principles-based approach to help organizations design and implement enterprise-wide approaches to risk management. Enterprise risk management deals with risks and opportunities affecting value creation or preservation, defined as follows: Enterprise risk management is a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. This definition is purposefully broad. It captures key concepts fundamental to how companies and other organizations manage risk, providing a basis for application across organizations, industries, and sectors. It focuses directly on achievement of objectives established by a particular entity and provides a basis for defining enterprise risk management effectiveness. Components of Enterprise Risk Management Enterprise risk management consists of eight interrelated components. These are derived from the way management runs an enterprise and are integrated with the management process. These components are: Internal Environment - The internal environment encompasses the tone of an organization, and sets the basis for how risk is viewed and addressed by an entity's people, including risk management philosophy and risk appetite, integrity and ethical values, and the environment in which they operate. Objective Setting - Objectives must exist before management can identify potential events affecting their achievement. Enterprise risk management ensures that management has in place a process to set objectives and that the chosen objectives support and align with the entity's mission and are consistent with its risk appetite. Event Identification - Internal and external events affecting achievement of an entity's objectives must be identified, distinguished between risks and opportunities. Risk Assessment - Risks are analysed, considering likelihood and impact, as a basis for determining how they should be managed. Risks are assessed on an inherent and a residual basis. Risk Response - Management selects risk responses - avoiding, accepting, reducing, or sharing risk - developing a set of actions to align risks with the entity's risk tolerances and risk appetite. Control Activities - Policies and procedures are established and implemented to help ensure the risk responses are effectively carried out. Information and Communication - Relevant information is identified, captured, and communicated in a form and time frame that enable people to carry out their responsibilities. Effective communication also occurs in a broader sense, flowing down, across, and up the entity. Monitoring - The entirety of enterprise risk management is monitored and modifications made as necessary. Monitoring is accomplished through ongoing management activities, separate evaluations, or both. Enterprise risk management is not strictly a serial process, where one component affects only the next. It is a multi-directional, iterative process in which almost any component can and does influence another.