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Answer: The ERM program should provide an integrated strategy to manage risk across the company as a whole.
## Explanation Option D is the correct answer because it reflects the core principle of Enterprise Risk Management (ERM) that is consistent across various definitions: - **Integrated Strategy**: ERM emphasizes a holistic approach to risk management that spans the entire organization, rather than managing risks in silos - **Enterprise-wide Perspective**: ERM considers all types of risks (strategic, operational, financial, compliance) across all business units and functions - **Strategic Alignment**: ERM aims to align risk management with the organization's overall strategy and objectives **Why other options are incorrect:** - **Option A**: While risk transfer and insurance can be components of risk management, ERM focuses on comprehensive risk management rather than just cost reduction through risk transfer - **Option B**: Reducing earnings volatility may be a benefit of ERM, but it's not the primary goal across all ERM definitions. ERM aims to optimize risk-adjusted returns and support strategic objectives - **Option C**: ERM should be integrated with operations, not managed separately. Effective ERM requires collaboration between risk management and operational functions ERM's fundamental principle is creating a unified framework for identifying, assessing, and managing risks across the entire enterprise to support the achievement of organizational objectives.
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A board of directors is evaluating the implementation of a new ERM program at an asset management company. Which statement below is consistent across the various current definitions of an ERM program and most appropriate to be included in the company's ERM definition and goals?
A
The ERM program should reduce costs by transferring or insuring most of the company's major risk exposures.
B
The major goal of the new ERM program should be to reduce earnings volatility.
C
The ERM program should be managed separately from the operational side of the company.
D
The ERM program should provide an integrated strategy to manage risk across the company as a whole.
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