Building a Multidimensional Risk Management Strategy for the Enterprise: An Integrated Approach to Enterprise Risk

Risk management has been recognized as an important topic for organizations not only in assessing and responding to risk, but also in providing an important venue to identify opportunities and bringing values to organizations. Today most organizations still rely on the traditional approach to risk management. Such approach is built on stovepipe-oriented risk management where the focus is mainly on the tactical business issues and does not consider strategic sources of risk. Moving to an enterprise risk management (ERM) is in practice but the level of maturity is different from one organization to another. Although, ERM overcomes many of the limitations of the traditional risk management models, it brought with it its own limitations and challenges. The establishment of an enterprise risk management framework is an ongoing effort by various organizations as it has been agreed that it has an influential role in shaping organizational-wide risk strategies and policies in a shared governance structure. The perceived silo-based nature of risk management and the relevant risk function integration and communication holistically, however, remains a challenge. The main objective of this paper is to address this significant problem by proposing a holistic multidimensional risk management framework with three key domains: a Business Process-Centric Risk Management System (BPC-RMS), a Risk Dialogue Matrix (RDM) based on Expert rules and Data Mining, and a Risk Management Program (RMP) led by a Risk Management Office. A holistic multidimensional risk management approach looks at all functional areas in the enterprise, identifies all the risks in these areas, analyzes their relationships and impacts, and provides a balance among all risk activities. The proposed framework is designed to build upon the standards and best practices of risk management. Using design science methodology, we propose and evaluate a multidimensional framework to integrate these risk management concepts into the business process of the enterprise.