We manage more than a quarter billion dollars of premiums for a diverse range of clients around the globe.
Last week, I attended the Enterprise Risk Management (ERM) Workshop in North Carolina, held by North Carolina State University (NCSU). This was the second such meeting that was hosted by NCSU. While many topics were discussed, the recurring theme resonating through the workshop was how can a company effectively report an ERM program to the board and explain how such program adds value.
With the multitude of information available, it is no surprise that the process of implementing an ERM Program seems daunting. As highlighted in our prior blog, Strategic Risks: More Important Now Than Ever, one of the very first steps in this process is to form an Executive Risk Committee (ERC).
Strategic Risks are risks that affect or are created by an organization’s business strategy and strategic objectives. For companies that are committed to thoughtfully managing risk, strategic risk is not a new concept. However, with social media and the speed in which everything happens these days, strategic risks are becoming a high priority for senior leaders. In a recent study released by Deloitte, 81% of companies surveyed now explicitly manage strategic risks, rather than simply focusing on more traditional risk areas, such as operational, compliance and financial risks.
I recently attended the Enterprise Risk Management Roundtable Summit in North Carolina held by NC State University that included representatives from Harley Davidson and Caterpillar among the speakers. This summit helped me gain insight into the emerging importance of a comprehensive risk management program and different strategies the companies have implemented.
When evaluating your company’s risks, one concept that is frequently overlooked is the idea of how human error could impact your organization. Until recently, there has been very little written on this subject. However, in the recent issue of the RIMS Risk Management Magazine, an article by Tony Kern and David McKay touched on this point and successfully demonstrated how human error is one risk that companies must continually monitor.
To continue the discussion of Enterprise Risk Management (ERM) and its role within the business world The ALS Group held its second ERM meeting to discuss recent articles that show the influence of ERM today in business. One periodical that often speaks of ERM is Rough Notes. This week’s discussion revolved around The Institutes update of the ARM course curriculum to include ERM into its material; see here for the article written by Michael Moody.
It seems like everyone is talking about Enterprise Risk Management (ERM) these days, but the question has become: what is anyone doing to further understand how ERM can provide the strategic value that everyone is writing about? One initiative that we at The ALS Group kicked off last Friday is our bi-monthly ERM Work Group meeting where our entire team (and occasionally guests) meet to discuss how ERM is being conveyed to senior level executives through organizations like RIMS and CFO magazine to name a few.
To begin the year of 2013, more and more businesses are looking for new ways to increase their company’s profit margins and management of risk, and align the two. One of the best ways this is often achieved is by using ERM to continually assess not only what type of risks are out there that can be insured, but also how those risks can be managed through the operational and strategic environment that your company implements.
The Risk and Insurance Management Society has been discussing the benefits of Enterprise Risk Management (ERM) for over 10 years now. In addition, they have developed the discipline of Strategic Risk Management (SRM) within the courses and material they publish. To them, ERM seeks to dial down the volatility in the operations of any organization, while SRM is meant to evaluate whether the company’s business strategy on risk is appropriate and provides long term sustainability of the company’s profits. Thus, if implemented correctly, ERM allows SRM to take a critical and impartial view on the way the company does business and mitigates risk.
Enterprise Risk Management, despite being on the tip of the risk and insurance world’s tongue, is still struggling to gain a foothold in most organizations. The question that consistently emerges is whether or not implementing an Enterprise Risk Management Framework can truly add value to a company’s strategic development. The key to a successful ERM Framework is to instill the philosophies of Enterprise Risk Management throughout the organization so the company as a whole is fostering a risk-aware culture.
