As a concept, Enterprise Risk Management (ERM) is defined as the process of organizing, leading, and controlling the activities of a company in a way that reduces risks. ERM addresses a variety of risks that could affect the financial integrity of an organization. Outside of accidental losses, ERM focuses on losses that could be incurred from strategy alterations, economic changes, and operational differences. Although ERM is often a concern at the executive level, investors, regulatory agencies, and industry leaders also take notice of an organization's risk management strategies.
Financial service providers such as banks and lending institutions are prime examples of organizations that must effectively manage risk in order to survive. In some industries, boards of directors have a duty to assess the risk management practices of the organizations they lead, and make adjustments when necessary.