High Performance Risk Management
Written by Kevin L Mabry | Newsletter Topics
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LOS ANGELES—Risk managers, whose job once focused on a basic “bucket of risks,” and making decisions about which risks are transferable and which ones the company should retain, have been “migrating along an evolutionary path which is allowing us to be more strategic,” Chris Mandel, senior vice president of strategic solutions at Sedgwick, said at the RIMS ERM Conference 2017 here.
He noted during the session, “The Trouble with ERM,” that risk managers now need to alter their focus. “The question for risk managers now is, how do we get our organizations to focus on long-term success and recognize the link between strategy and risk?” he said.
Erin Sedor, president at Black Fox Strategy, said that she found through personal experience the importance of connecting with the CEO and aligning with the company’s strategy when setting up a program. “You need to know what they are talking about and understand strategy,” she said.
Unable to find a satisfactory definition of strategy for ERM, Sedor came up with her own: “A strategic business discipline that allows an organization to manage risks and seize opportunities related to the achievement of its objectives.” She added that, unfortunately, enterprise risk is not a term that resonates with the c-suite, but strategy is.
She identified three major problems with ERM that can dampen its prospects:
Looking at them from a different vantage, however, strategic planning is planning for growth; risk management allows you to eliminate weaknesses that will impede growth, which is why it’s important; and continuity planning will identify and mitigate the threats that impact sustainability. “That is how they work together,” she said, adding, “You are also looking at weaknesses that when coupled with a threat, will take you out. Those are your high-priority weaknesses. Using a mission-critical context makes it all manageable.”
At this point, if a risk manager can gain enough leverage to talk to executives throughout the organization about what mission-critical means to the company, its impact, and then about tolerances and creating a more integrated program, “all of a sudden you’ve talked about ERM and they didn’t even know it. They thought you were talking about strategy,” she said.
- A limited view of the organization’s mission, growth and survival.
- Silos. Breaking through them is a nonstop process, no matter how a company tries to improve the situation—especially in the areas of risk management, continuity planning and strategy, which typically happen in very different parts of the company.
- Size. Because ERM programs are notoriously huge, “The thought is that ERM will cost too much money, take too many resources and take too long to implement. And that by the time it’s finished, everything will have changed anyway,” she said.
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