{"id":1751,"date":"2022-09-30T13:14:18","date_gmt":"2022-09-30T13:14:18","guid":{"rendered":"https:\/\/www.theirmindia.org\/blog\/?p=1751"},"modified":"2026-01-21T17:34:00","modified_gmt":"2026-01-21T17:34:00","slug":"enterprise-risk-management-v-s-traditional-risk-management","status":"publish","type":"post","link":"https:\/\/www.theirmindia.org\/blog\/enterprise-risk-management-v-s-traditional-risk-management\/","title":{"rendered":"Enterprise Risk Management v\/s Traditional Risk Management"},"content":{"rendered":"<p><a href=\"https:\/\/www.theirmindia.org\/certification-track\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-5040\" src=\"https:\/\/www.theirmindia.org\/blog\/wp-content\/uploads\/2025\/11\/blog-image-300x74.png\" alt=\"Getting India Risk Ready\" width=\"668\" height=\"166\" srcset=\"https:\/\/www.theirmindia.org\/blog\/wp-content\/uploads\/2025\/11\/blog-image-300x74.png 300w, https:\/\/www.theirmindia.org\/blog\/wp-content\/uploads\/2025\/11\/blog-image-768x191.png 768w, https:\/\/www.theirmindia.org\/blog\/wp-content\/uploads\/2025\/11\/blog-image.png 1024w\" sizes=\"auto, (max-width: 668px) 100vw, 668px\" \/><\/a><\/p>\n<p><strong>What <\/strong><strong>Is Traditional Risk Management?<\/strong><\/p>\n<p>All businesses carry out some form of risk management. Traditional risk management, more commonly referred to as <em><strong><u><a href=\"https:\/\/www.theirmindia.org\">&#8220;risk management<\/a><\/u>,&#8221;<\/strong><\/em> tends to be a formal business function in large companies. How many people are involved depends on the size of the company, its risk philosophy and what it is required to do by law?<\/p>\n<p><strong>Characteristics <\/strong><strong>Of Traditional Risk Management:<\/strong><\/p>\n<ul>\n<li>Standardised<\/li>\n<li>Backward-looking<\/li>\n<li>Risk averse<\/li>\n<\/ul>\n<p><strong>Limitations <\/strong><strong>Of Traditional Risk Management<\/strong><\/p>\n<ul>\n<li>Does not incorporate informed risk-taking<\/li>\n<li>Limited approach<\/li>\n<li>Less able to adapt to changing scenarios<\/li>\n<li>Harder to tailor to business risk profile or circumstances<\/li>\n<li>Restricts risk management to the team or department level<\/li>\n<\/ul>\n<p><strong>What <\/strong><strong>Is Enterprise Risk Management?<\/strong><\/p>\n<p>ERM is defined\u00a0as \u201ca methodology that looks at risk management strategically from the perspective of the entire firm or organization.\u201d<\/p>\n<p>How Does<em><strong> <u><a href=\"https:\/\/www.theirmindia.org\/global-qualifications\/what-is-erm\">Enterprise Risk Management<\/a><\/u> <\/strong><\/em>Differ From Traditional Risk Management?<\/p>\n<ul>\n<li>Some experts pin the difference on timing: traditional risk management typically only occurs after an incident has already happened and is done to prevent that situation from happening again. On the other hand, ERM is future-looking, and attempts to determine potential events and situations that could, or are even likely to, occur.<\/li>\n<li>Traditional Risk Management tends to focus on risk avoidance, while ERM takes note of potential risks and identifies which ones are worth taking, therefore focusing more on opportunity alongside pure risk.<\/li>\n<li>ERM encompasses the entire enterprise; and is top-down, whereas traditional risk management may focus on only one area, and not emanate from a holistic view of the entire organization.<\/li>\n<li>As traditional risk management (TRM) is well established and routinely practised across businesses, it has become quite standardized. ERM is more dynamic, agile and adaptable to situations or organizations.<\/li>\n<\/ul>\n<table width=\"0\">\n<tbody>\n<tr>\n<td width=\"298\"><strong>Traditional Risk Management (TRM)<\/strong><\/td>\n<td width=\"302\"><strong>Enterprise Risk Management (ERM)<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"298\">\u2794\u00a0\u00a0\u00a0\u00a0 Focuses solely on risks that can be insured.<\/td>\n<td width=\"302\">\u2794\u00a0\u00a0\u00a0\u00a0 Accounts for insurable hazards along with any other risk an organisation faces that no amount of money can remedy.<\/td>\n<\/tr>\n<tr>\n<td width=\"298\">\u2794\u00a0\u00a0\u00a0\u00a0 Reactive risk management that takes place only after an incident has happened to prevent it from reoccurring<\/td>\n<td width=\"302\">\u2794\u00a0\u00a0\u00a0\u00a0 Proactive risk management that attempts to predict potential events before they happen, while considering impact and probability<\/td>\n<\/tr>\n<tr>\n<td width=\"298\">\u2794\u00a0\u00a0\u00a0\u00a0 Risk-averse mindset &#8211; viewing risks only as something that can cause the organisation to lose money<\/td>\n<td width=\"302\">\u2794\u00a0\u00a0\u00a0\u00a0 Risk-taking mindset &#8211;\u00a0 where the downsides and upsides of risks are considered to determine which pose an opportunity for growth and expansion<\/td>\n<\/tr>\n<tr>\n<td width=\"298\">\u2794\u00a0\u00a0\u00a0\u00a0 Fragmented approach where each department manages risk independently with no communication outside of their respective business units<\/td>\n<td width=\"302\">\u2794\u00a0\u00a0\u00a0\u00a0 Integrated and holistic approach where risk management is coordinated throughout the business with senior-level oversight to help better allocate resources and prioritise risks<\/td>\n<\/tr>\n<tr>\n<td width=\"298\">\u2794\u00a0\u00a0\u00a0\u00a0 Disjointed activity with no connection to strategic objectives and little awareness of risk across the organisation<\/td>\n<td width=\"302\">\u2794\u00a0\u00a0\u00a0\u00a0 Risk is embedded as a culture and ingrained as a valuable decision-making tool to ensure business success<\/td>\n<\/tr>\n<tr>\n<td width=\"298\">\u2794\u00a0\u00a0\u00a0\u00a0 Follows basic and limited standards that may stall operations and provide minimal value to an organisation<\/td>\n<td width=\"302\">\u2794\u00a0\u00a0\u00a0\u00a0 Follows modern standards such as the COSO framework and ISO 31000 which complement the technical and soft skills required to extend risk management beyond a compliance-oriented exercise<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Interested to learn more about ERM? Check out <em><strong><u><a href=\"https:\/\/www.theirmindia.org\/certification-track\">IRM&#8217;s certifications<\/a><\/u><\/strong><\/em> to understand ERM in depth as the <a href=\"https:\/\/www.theirmindia.org\"><strong>Institute of Risk Management<\/strong><\/a> is the word&#8217;s leader professional body in Enterprise Risk Management with recognition in 140+ countries.<\/p>\n<p><em><strong>Blog Author: Sanskar Raheja, Level 1 Qualified<\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What Is Traditional Risk Management? All businesses carry out some form of risk management. Traditional risk management, more commonly referred to as &#8220;risk management,&#8221; tends to be a formal business function in large companies. How many people are involved depends on the size of the company, its risk philosophy and what it is required to do by law? Characteristics Of Traditional Risk Management: Standardised Backward-looking Risk averse Limitations Of Traditional Risk Management Does not incorporate informed risk-taking Limited approach Less able to adapt to changing scenarios Harder to tailor to business risk profile or circumstances Restricts risk management to the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3434,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[56],"tags":[],"class_list":["post-1751","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-risk-360"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v15.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Enterprise Risk Management v\/s Traditional Risk Management - IRM India Affiliate<\/title>\n<meta name=\"description\" content=\"Learn how Enterprise Risk Management (ERM) differs from Traditional Risk Management in approach, mindset, and strategy. 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