Application of enterprise risk management models during new business development / P.E. Heyneke

Enterprise is often described as risk for reward, but it may be possible to reducethe risk while improving returns. According to SEDA, failure rates of SMMEs inSouth Africa range from 70 to 80 percent. The need for this study arose when itwas found that most SMMEs did not have a formal system in place to mitigate theirrisks right from the outset in the feasibility study, the business plan design and thestart–up of the business. This lack of mitigation controls could be a result of a lackof understanding of the enterprise risk management (ERM) methodology or aninappropriate ERM decision–making model to assist them in a way that wouldmitigate their risk and minimise financial losses.The ERM approach can anticipate unplanned occurrences and is a systematic wayof foreseeing the future. Entrepreneurs and business owners take on risks topursue new business objectives within their respective risk appetites. This studyalso evaluated several models of risk identification and the ERM methodology. Inthis study an ERM model, ISO 31000, was applied in a business case and acomparison was made between the risks identified in the business plan and theERM approach.