Section 7: Introduction to Enterprise Risk Management

Question 1

Traditional Risk Management vs Enterprise Risk Management (5 Each)

Answer 1

Who (is involved) // What (do they look at) // Where (do they look in the org) // Why (Goal of each) // When (Before vs after losses)

TRM:
- Manages Downside of risk
- Minimizing risk impact
- Functional, siloed treatment of risk
- Risk ID and ownership of risk solely on RM
- Reactive

ERM:
- Upside and Downside
- Strategic objectives of Org considered
- Cross functional treatment across org
- Experts and committees ID risk. Accountability to all stakeholders
- Proactive and opportunistic

Question 2

What is ERM not? (5)

Answer 2

SE CIC

• Separate policies and approached
• Eliminate all risk plan
• Compliance / disclosure only focused
• Internal Control Replacement
• CRO - Just having this position

Question 3

4 Broad Categories of Risk for ERM

Answer 3

OF HS (the OF girl from HS is a broad)

• Operational: Day-to-day affairs centered around principal operations
• Financial: Originate with decisions coming out of finance department
• Hazard: Addressed in TRM. Legal liability, property damage and natural catastrophes
• Strategic: Originate in Exec board

Question 4

6 Impacts of ERM on an Org

Answer 4

QB MAP O (Quarter Back the Map of the Org)

• Quality, process and Tech increased
• Brand and Rep protected
• Morale and Productivity increased
• Awareness of importance of RM
• Profitability increases
• Objectives supported through planning and budgeting

Question 5

5 Requirements of the ERM Implementation Process

Answer 5

(RICES)

Risk Assessment ERM
- Clear understanding of risk appetite and risk taking ability

Implementation Leader and Dedicated Cross-Functional Committees
- Dedicated leader

Common Language Regarding Risk
- Easy to understand across company

Established Framework (6)

Support from Senior Management Team
- Need active support and to provide incentive

Question 6

6 Areas to Establish Framework in an ERM Implementation Process

Answer 6

(STTRRM)
- Stakeholders that are key ID’d
- Training and education of employees
- timeframe and budget Established
- RM policy / procedure
- Roles, responsibilities, and accountabilities
- monitoring and review of the progress of implementation and modifying, if necessary.

Question 7

Obstacles of ERM (4)

Answer 7

SLIP
SUPPORT // LEADERSHIP // INITIAL INVESTMENT // PERCEPTION
- Lack of support from management
- Hard to convince org to invest
- Different leadership skills needed
- Risk is viewed negatively, so orgs don’t understand upside (act of courage / not reality)