That is, ERM should function as a proactive, rather than reactive, mechanism to ensure that appropriate controls are in place before the product or activity begins and that the board of directors and senior management understand the nature of the new products or activities and their impact on the organization’s risk profile.
This can be accomplished, in part, through the new product approval process, which should include participation across the organization from credit risk, market risk, operations, accounting, legal, compliance, audit, and senior line management.