Answer-first summary for fast verification
Answer: ERM approach identifies, monitors, and manages all types of risks in an integrated manner, while a silo-based approach manages risks in isolation.
## Explanation Option B is correct because it accurately captures the fundamental difference between ERM and silo-based risk management: **Enterprise Risk Management (ERM):** - Takes a holistic, integrated approach to risk management - Views risks across the entire organization as interconnected - Manages all types of risks (strategic, operational, financial, compliance) together - Considers risk correlations and interdependencies **Silo-based Risk Management:** - Manages risks within individual business units or departments - Treats risks in isolation without considering cross-functional impacts - May lead to suboptimal risk management decisions due to lack of coordination - Can result in risk concentration or missed opportunities for risk diversification Option A is incorrect because ERM does not focus primarily on operational risks - it covers all risk types comprehensively. Option C is incorrect because ERM's broad focus typically reduces, not increases, overall risk exposure through better coordination and diversification benefits.
Author: Tanishq Prabhu
Ultimate access to all questions.
Which of the following observations correctly describes the fundamental differences between Enterprise Risk Management (ERM) and a traditional silo-based risk management program?
A
ERM approach reduces the overall risks to the enterprise by focusing primarily on operational risks while a silo-based approach often overlooks operational risks due to its focus on individual business units.
B
ERM approach identifies, monitors, and manages all types of risks in an integrated manner, while a silo-based approach manages risks in isolation.
C
ERM approach tends to increase risk exposure due to its broad focus, while a silo-based approach decreases risk exposure through focused, individualized risk
No comments yet.