According to Hopkin (2018), enterprise risk management can be described as the process of organizing, planning, leading and overseeing the control of organizational undertakings with the fundamental aim of reducing the potential effects of risks on a company’s earnings and capital (Hopkin, 2018). Risk management has especially become an essential concern in corporate management because of the dynamic changes in the global environment. Subsequently, enterprise risk management has provided manufacturing industries to use integrated techniques while dealing with risks. Risk exposures are controlled within portfolio contexts rather than by isolation. Part of the core goals of ERM was to reduce the overall inefficiencies that have been caused by lack of synergies that exist between different departments that deal with risk management leading to enhanced cost savings by avoiding potential duplication of risk management as well as related expenditure (Zou, Isa & Rahman, 2017).

Zou, Isa and Rahman, (2017) argues that the main discussion that has gained momentum in as far as the applicability of ERM in manufacturing is concerned is effectiveness of the program as well as its benefits to organizations. The proponents are imperative that the implementation of a conclusive and integrated risk management framework can provide a remarkable foundation for improving the performance of manufacturing firms by mitigating stock and earnings volatility, creating risk awareness, enhancing coordination between different activities that are used to manage risks, elevating capital efficiency, and reducing costs of external capital (Zou, Isa & Rahman, 2017). Nonetheless, opponents argue that ERM is implemented as a compliance measure in manufacturing firms.

The contemporary world has changed significantly and the role that is played by risk management has gone beyond hazard and financial risk management practices (Bromiley et al., 2015). Even less, the theoretical argument about the value of ERM is the manufacturing firms should adopt ERM programs if they are able to come up with shareholder value. ERM provides a foundation for increasing shareholder wealth by allowing manufacturing corporations to establish an optimal trade-off between returns and risks. The objective of risk management is not to minimize risks within a firm only (Zou, Isa & Rahman, 2017). Instead, the measure is implemented to optimize the overall combination of risks as well as bolstering shareholder values. Manufacturing companies that adopt ERM programs are better off when it comes to comprehending the underlying aggregated risk inherent in various business undertakings (Bromiley et al., 2015). Firms benefit through the establishment of objective-oriented basis for allocating resources. The fact that ERM provided manufacturing companies with the cornerstones for obtaining more information about risks means that such firms end up with more comprehensive systems for managing information as well as efficient decision making processes.

According to Grace et al. (2015), manufacturing companies engage in the management of different kinds of risks including changing labor regulations and laws, natural disasters and lack of effective control over the activities of the suppliers (Grace et al., 2015). However, constant market changes, regulatory demand and internal forces make it challenging to find out risks that are most critical. Quantitative enterprise risk management software provides the manufacturers with the convenience of analyzing their opportunities and risks closely and especially to align those opportunities and risks with better strategic plans. Also, manufacturers are able to define their strategic goals (Hopkin, 2018).

Examples of ERM solutions for manufacturing firms include; what-if scenario analysis, key risk indicators, key performance indicators, risk analytics, automated alerts, risk and control assessments and risk heat maps. Manufacturing companies can benefit by changing their corporate cultures from those that redirect attention on meeting Information Technology compliance obligations to those that focuses on overall risk reduction. Furthermore, visibility into the overall organizational security plays essential role in overseeing the establishment of justifiable ERM program (Hopkin, 2018). Reducing enterprise risk as well as the development of risk management languages requires firms to define scopes, map risks, come up with action plans, automate their technologies, and monitor and measures their metrics.