Another Agency Jumps on the ERM Bandwagon

This week, another governmental agency announced plans to bolster their Enterprise Risk Management practices. What is interesting is that the agency making the announcement, the U.S. Commodity Futures Trading Commission, has been the subject of merger speculation with the Securities and Exchange Commission, the other agency recently announcing a similar move.  Here is an excerpt from the press release.

The U.S. Commodity Futures Trading Commission hopes a proposed increase to its budget will allow it to create a new office geared toward detecting and reacting to emerging new risks to the marketplace. This new Enterprise Risk Management Office would be funded by a portion of President Barack Obama's proposed fiscal-year 2011 budget increase and would " coordinate agency responses to address risks to markets and institutions the CFTC regulates," according to CFTC spokesman David Gary.

The idea of creating an office to monitor markets for emerging new risks isn't a new concept. The U.S. Securities and Exchange Commission in 2004 launched the Office of Risk Assessment, which was also designed to spot new trends or problems in the markets and serve as an enterprise-wide office to work with all of the SEC's divisions to police for risk. SEC Chairman Mary Schapiro last year combined that office with several others to form a new Division of Risk, Strategy and Financial Innovation and tapped University of Texas Law School Professor Henry T.C. Hu to run it.

Given the similarities in approach, a CFTC/SEC merger may be a good idea to eliminate redundant activities and reduce the skyrocketing deficit.