Introduction
Enterprise Risk Management is defined1 as: “A process, affected 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 the entity’s objectives.”
In summary, ERM: * Forms a basis for the credit union’s decision making processes from the development of its strategy and objectives to its daily operations, reporting and compliance routines; * Provides the ability for management to make more efficient use/allocation of capital and resources within the organization to optimize capital levels. * Optimizes risk management by balancing the cost of risk with the cost of control for all aspects of the credit union’s potential risk areas to ensure organizational objectives are met. * Seeks to enhance value and preserve the longer term viability of the credit union.

The importance of enterprise risk management
Value is created by informed and inspired management decisions in all spheres of an entity’s activities, from strategy setting to operations. Entities failing to recognize the risks they face, from external or internal sources and to manage them effectively can destroy value – in absolute or relative terms for shareholders and other stakeholders, including the community and society at large. For companies, shareholders realize value when they recognize value creation and benefit from share-value growth. For governmental entities, value is realized when constituents recognize receipt of valued services at acceptable cost.
Enterprise risk management facilitates management’s ability deal effectively with potential future events that create uncertainty. Provides the mechanisms to respond in a