ERM adoption – for-profit organizations and HE organizations
The term ‘Enterprise Risk Management’ is used to describe a formal tool that is employed by the organizations for the evaluation and management of the risks associated with the business processes. It enables the organization to achieve the goals it desires smoothly. This tool finds applicability in both for-profit and non-profit organizations.
There are various qualities that are common between the for-profit organizations and the not-for-profit firms operating in the market. There are distinct differences, as well. As stated by the term, for-profit organizations work with a motive to make as many profits as possible through their business processes. Non-profit organizations, on the other hand, refer to the organizations whose primary objective of the operation is not to make money. The primary objective of such organizations is the generation of revenue for serving a specific mission adopted by the organization, especially for the good of society. This primary difference in the operating principles also makes the adoption of an effective enterprise risk management policy different for the organizations.
The fundamental differences between the two
The primary difference between the adoption of an ERM in for-profit organizations and non-profit organizations is the purpose that they look to fulfill with it (Paape & Speklè, 2012). As stated already, the motives of the for-profit firms are profit-driven. The sole aim is to enhance the earnings of the organization and increase market shares. In the case of non-profit organizations, the primary purpose of adopting an ERM is influenced by the stakes (Daud & Yazid, 2009). In this context, it is necessary to mention that the stakes in higher education institutions are incredibly diverse. The concept of education cannot be driven by the profit-driven motives of an organization. Instead, the entities that drive education organization include compliance with the board of education, the safety of the facility infrastructure, and a contemporary approach of imparting education, which is in alignment with the realities of the present world.
Another primary difference for the adoption of ERM in HE environments is that they have the tools of progressive technology and the opportunities to use them. They tend to use them to serve analytical tasks, unlike the business organizations, where finding ways to boost profit margins is the prime interest. There is another distinct variation between ERM adoption in the two types of organizations. In business organizations, decisions or vital judgments are made by the authority of the organization. A singular decision is made for a point under consideration in alignment with the organization’s objectives, and the various departments tend to follow it (Lin, Wen & Yu, 2012). In the case of higher education institutes, there is a vast diversity between the various departments, and each department may have its own set of objectives that it may wish to achieve. Adopting a common framework similar to for-profit business organizations is thus not possible in the education institutes. These organizations also have the accessibility to vast information pools, which are considered to increase the quality of decisions made. The various coverage requires more informed decision making and thus demands varied risk management principles to ensure that the objectives of each of the departments can be fulfilled as well the organization goals are not compromised either.