By The Numbers: Individual Bias and Enterprise Risk Management

In theory, enterprise risk management (ERM) appears to be a succinct and effective risk management model. In practice, as is the case with most managerial techniques, the devil is in the implementation. This study explores this issue by examining how the composition of ERM groups determines which risks are managed and which risks are ignored. In two experiments, we find that groups with accounting or financial backgrounds place greater emphasis on financial risks compared with cross-functional groups. Results suggest that organizations will achieve different ERM outcomes from using cross-functional groups than financially oriented group.