Enterprise Risk Management to the rescue: - Well sort of..
By on October 14, 2009 8:27 AM
A recent article in Risk Specialist, our regular client magazine, discussed ways of effectively implementing Enterprise Risk Management (ERM) - view the article. Whilst ERM is widely talked about, personally, I lack sufficient knowledge to decide whether I think it's of real business value or not. When I said this to a colleague, Andrew Tait of Core Risks Limited, he tried to explain what I was missing:
"ERM
is a business practice which plugs into your clients' current
organizational structure, which feeds information into their budget and
strategic cycle, provides a venue for cross functional (dare I say
cross silo) dialogue, and actually helps them compare the risk and
opportunity costs of disparate operational "necessities" as that
'critical' budget request from IT/IS ........to that 'urgent' production
capacity issue from Engineering...... to that request for on-line
subcontractor training submitted by Safety .........to that 'amazing'
opportunity for a new construction category raised by planning."
"And by the way , this practice also helps your client improve their debt and financial ratings from the rating agencies (such as S&P), and satisfy some of the tough Corporate Governance questions being raised by their Board of Directors."
It all sounds impossible but according to Andrew that's because I haven't seen an effective ERM program customized to the specific business needs, value drivers and culture of the company in which it is embedded.
He said that ERM, when done correctly, is sort of like a change management program on steroids. It promotes a risk management culture within the company, changes how different departments view and prioritize the treatment of Risk and Opportunities - both in their area and others, and helps to prioritize and justify where your limited assets should and should not be allocated. It can do all this things while also meeting the increased Corporate Governance expectations of Rating Agencies and your Board of Directors.
I'd be really interested to hear if anyone has any first hand experience or views. Look forward to some healthy debate on this issue!
If you would like more information about ERM then speak with Andrew Tait (ATait@corerisksltd.com or (484) 581-2824). Andrew is a Principal of Core Risks Limited, a Jardine Lloyd Thompson Associated Company that is working with our independent US broking partners to enhance their client service offering. Core Risks have significant experience at developing and implementing ERM, both from the inside and as consultants.
"And by the way , this practice also helps your client improve their debt and financial ratings from the rating agencies (such as S&P), and satisfy some of the tough Corporate Governance questions being raised by their Board of Directors."
It all sounds impossible but according to Andrew that's because I haven't seen an effective ERM program customized to the specific business needs, value drivers and culture of the company in which it is embedded.
He said that ERM, when done correctly, is sort of like a change management program on steroids. It promotes a risk management culture within the company, changes how different departments view and prioritize the treatment of Risk and Opportunities - both in their area and others, and helps to prioritize and justify where your limited assets should and should not be allocated. It can do all this things while also meeting the increased Corporate Governance expectations of Rating Agencies and your Board of Directors.
I'd be really interested to hear if anyone has any first hand experience or views. Look forward to some healthy debate on this issue!
If you would like more information about ERM then speak with Andrew Tait (ATait@corerisksltd.com or (484) 581-2824). Andrew is a Principal of Core Risks Limited, a Jardine Lloyd Thompson Associated Company that is working with our independent US broking partners to enhance their client service offering. Core Risks have significant experience at developing and implementing ERM, both from the inside and as consultants.
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