POB Limited wants to design and implement an effective Enterprise Risk Management (ERM) system. Evaluate the challenges likely to be faced by the Company during implementation of ERM system.

Risk management also known as Enterprise Risk Management ('ERM'), is a systematic and holistic approach for firms to address all their risks, whether operational, strategic or financial, comprehensively. ERM focuses on identifying risks, developing and monitoring risk management system and reacting to risk events, when they occur. POB Limited may face the following challenges in designing and implementing an effective ERM system, including: 1. Effectively linking risk and strategy: Integrating risk management into the overall corporate strategy is a challenge for many Indian firms. The challenge is to have an ERM system that encompasses a process capable of being applied in strategy setting across the enterprise. 2. Implementing cost-effective risk management for small and medium-sized enterprises: While the costs of risk management failures can be high, designing and implementing efficient ERM can also be quite costly, especially for small and medium-sized firms. 3. Addressing all major areas of risk: ERM requires a firm to take a portfolio view of risk; boards must consider how various risks inter-relate, rather than treating each business and risk individually. This is a significant challenge for many boards. 4. Mitigating new risks: In India, many complex areas of risks have emerged in the last decade or so, which has made risk management particularly challenging. For example, some traditional areas of risk, such as political instability and strikes and unrest, appear to have subsided while others, such as information and cyber security as well as terrorism and insurgency, have increased in prominence. Companies operating in various industries have experienced the theft of data and sensitive information. For companies in major cities, the threat of terror attacks has become a growing cause for concern, which can be hard to manage by the company itself.