Enterprise Risk Management is an integrated and coordinated approach to port risks. It integrates different risks and ensures that a port’s organizational resilience capabilities are within its risk appetite and tolerance levels.
Risk management is part of organizational resilience, with ERM playing a vital integrating function. The latter allows for the determination of ports risk and resilience thresholds, assessment of exposures and impacts, and setting of priority areas. It incorporates different risk perspectives, such as financial and reputational and ensures that resilience-building efforts keep the actual port organizational resilience capabilities within their risk appetite and risk tolerance. Applied in the context of a port the ERM approach aims to:
- Identify areas of port exposure to risk (financial, operational, reporting, compliance, strategic, governance and reputational).
- Prioritize port risks and exposure and manage these as an interrelated risk portfolio rather than as individual risk silos.
- Evaluate the risk portfolio by considering internal and external contexts, systems, circumstances and stakeholders.
- Recognize that individual risks across the port are interrelated and can create a combined exposure that differs from the sum of individual risks.
- Provide a structured process for risk management, whether those risks are primarily quantitative or qualitative;
- Mainstream risk management as a component in critical decisions throughout the port.
- Identify the risks it is willing to take to achieve strategic objectives.
- Make available the means of communicating on risk issues to foster a common understanding of the risks faced by the port and their importance.
- Support internal audit activities through a structure which provides risk assurance to the Board and Audit Committee. Further guidance on how to carry out audits (internally or by a third party) to assess resilience is available from the Chartered Institute of Internal Auditors.
- Ensure that an effective management of risks is viewed as a potential competitive advantage, and that it contributes to achieving business and strategic objectives.
Implementing a fully functioning ERM programme is a significant undertaking in which all relevant port stakeholders, including third parties, should participate.
Additional information about ERM is available HERE.