Risk and Insurance Management Society (RIMS) Certified Risk Management Professional (CRMP) Practice Exam

Which type of risk management is considered the most effective for risk discussions at a board level?

1. Integrated

2. Enterprise

3. Traditional

4. Advanced

The correct answer is: Enterprise

Enterprise risk management (ERM) is considered the most effective for risk discussions at a board level because it adopts a comprehensive approach to identifying, assessing, and managing risks across the entire organization. ERM aligns risk management strategies with the overall business objectives and helps ensure that all potential risks—whether they are strategic, operational, financial, or compliance-related—are considered in decision-making processes. By employing ERM, boards can gain a holistic understanding of the organization's risk landscape, enabling them to make informed decisions that balance risk and opportunity. This perspective is essential for fostering a culture of risk awareness throughout the organization and supports strategic planning and governance. In contrast, integrated risk management involves aligning risk management with other business functions but may not encompass the breadth of risks that ERM addresses. Traditional risk management tends to focus on specific categories of risk, often on a silo basis, which limits the understanding of the interdependencies between risks. Advanced risk management could imply more sophisticated techniques or methodologies but may not necessarily cover the holistic organizational view that ERM provides. Overall, the structure and philosophy of ERM resonate well with the needs of a board, where strategic oversight and a thorough understanding of risks are critical for effective governance.