Risk Commentary

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What are the key questions of senior executive in considering the adoption or remediation of enterprise risk management? Answers to these questions form an overview to guide the successful roll-out of ERM. 

Key questions entertained by the C-suite with regard to ERM likely include these three:

a. What exactly is ERM?
Due to uneven development in the field, definitions are many. I offer a carefully crafted definition.

b. Is there a verifiable value proposition?

• get clarity on strategic identity and aims; 
• support execution of goals and objectives; 
• analyze and solve business problems.

c. How can it be integrated, quickly and efficiently, with existing planning and management?

• establish sound planning, and 
• use the principles of successful program implementation.

An elaboration on these answers is given over the course of the podcast series. 

Main points:

1. Enterprise Risk Management is rational planning.
2. Business Continuity and Emergency Planning.
3. A multiplicity of definitions. 
4. The planning regime. 
5. Survey results.
6. High Quality Risk Assessment. 
7. Principles of program success. 
8. Titles and job descriptions. 
9. Conceptual hurdles. 
10. Scenario analysis and Future Scenarios Planning.
11. Prove the value of Enterprise Risk Management.

KEY QUOTE

”Enterprise Risk Management holds the promise of capturing the entire spectrum of risk across the organization. This book answers the need for a generic ERM methodology, proven by experience in the field, in both public and private sectors.” (Robertson 2016 back cover)

LINKS
(E. Robertson 2016) Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation

Blog posts addressing risk tolerance:
Risk Tolerance: Non-Finance Examples
Making Sense of Risk Tolerance, Risk Appetite

Books and Courses
Consulting Contact

New website = RiskCommentary.ca
What is the “upside” of risk? Does ERM manage opportunity meaningfully? It leads to a structured innovation program that risk managers can lead with confidence.
 
1. Opportunity - origin of the idea in ERM
2. Opportunity - how can we make sense of the idea?
3. Opportunity - as innovation
4. Innovation
  a. an established discipline
  b. within the grasp of the risk manager; an expanded role
5. Innovation - Free Online Introductory Course 
6. Innovation - Paid Course 

Summary

KEY QUOTE

”...risk managers can borrow from the practice of innovation and use a structured method to seek out, evaluate, greenhouse and develop new ideas” (Robertson 2016 p.112)

LINKS 

Risk Commentary podcast books and courses.
(E. Robertson 2016) Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation 
Technology implementation - 3-part discussion, LinkedIn audio posts:

innovation - successful tech implementation

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[Re-edited for clarity.]
Due diligence is not the same as risk assessment; they are complementary.

Due Diligence and High Quality Risk Assessment: how could they be used?

1.  Quote: the hope for a less quantified, more qualified and thoughtful approach.
2. Due diligence definition vs risk assessment.
3. Order of operations: 
    a. select using matrix with criteria; 
    b. conduct risk assessment.
4. Maturity matrix definition.
5. Thought experiment: due diligence for investment project using maturity matrix.
6. Maturity matrix (semi-quantitative analysis) with categories:

• firm  
• management team
• business model
• deal structure

7. After d.d scoring, do risk assessment. 
8. This proposed method would help the management team.

9. “High returns = high risk”. Is it strictly accurate?

10. Application of Due Diligence and High Quality Risk Assessment in stages of major projects.

Summary 

KEY QUOTE
“The practice of due diligence has evolved into SOX checklists... Best practice awards are given to the weightiest presentations (by the pound) and third part vendors are predominantly selling ‘perfect solutions’ for enterprise risk management that will seriously impede your ability to conduct business.” (L. Burke Files, Due Diligence for the Financial Professional, 2010, p.6)

LINKS 
Robertson, E. Enterprise Risk Management Tools and Templates, 2016. p. 35 - Enterprise Risk Management maturity matrix, based on Carnegie-Mellon methodology.

Mark C. Paulk, Bill Curtis (CAST Research Labs), Mary Beth Chrissis, Charlie Weber Capability Maturity Model for Software (Version 1.1) 
The original article whose methodology has been borrowed and applied to many aspects of business.

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ERM, for some, consists solely of Financial Risk Management. Is this sound? We offer commentary on quantitative modelling and its place in Enterprise Risk Management.

1. Quantitative methods examples
2. Chief limitations of quantitative models
3. Proprietary internal risk rating systems
4. Forecasts and probability estimates
5. 2008-2009: crisis in risk management methods?
6. Strategy and market risks scuttle the company 
7. Recommendations
8. Quotes from the financial experts
9. What constitutes due diligence?
10. What is the worldview informing the faith in quantitative models?

Summary

KEY QUOTES

”...a new kind of blindness: the one induced by new technology and elaborate quantitative models.”
(B. Voyles ) Voyles and other financial experts mentioned quoted in Robertson, p.98

”...much more is being underwritten, correlated, and contemplated [by major insurers] than the traditional hazard risks.”
Interview with LoriAnn Lowery-Biggers and Sean Murphy by John Czuba; see EP01.

LINKS 

Blog post: Economic Crisis: Why ERM Did Not Fail

E. Robertson 2016 Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation 

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ERM mid-life crisis: how to rejuvenate and validate the program.

1. The curious juxtaposition of need vs poor take-up.
2. Steps in analyzing and fixing poor take-up in ERM programs.
3. Several specific fixes for improving the compelling nature of risk information.
4. What about “opportunity”? Ref: Innovation.
5. What about other risk management sub-disciplines?
6. Return to first principles in planning and HQRA.
7. Review again the principles of program success (Ep 15).

KEY QUOTE

“The result [of High Quality Risk Assessment] is a body of risk information that is fresh and revelatory, leading to problem solving. When that happens at your risk ID session, it is unmistakable. People see the logic of the method and acknowledge that it is working.”

LINKS 

Free introductory course: Innovation: How Can My Organization Get Started?
(E. Robertson 2016) Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation 

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How to implement an Enterprise Risk Management regime that is readily accepted and endures? Answer: by mastering the principles of program success, which will set you apart as an administrator.
Edited for length.
 

Employ proven success factors for program implementation shown in studies.
1. clear goals and objectives - how to formulate them?
2. senior executive support - how to secure meaningful exec support?
3. staff buy-in, the age-old problem - how to get take-up? is software the answer?
4. program adequacy - how does bad ERM design scuttle the program?
5. adequate resources - how to support people’s efforts
6. program champion - significant role for organizational change
7. incremental implementation - avoid common fail in a monolithic imposition

Value add: How to compile more risk criteria specifically for your business.
and
Summary
[see unedited transcript for full discussion]

Use all these principles as Risk Categories in your next risk ID session.

KEY QUOTE
“Master the principles of program success that have already been studied, and really apply to all administrative programs, all management initiatives -- not just ERM.”

LINKS
Edited transcripts: The ERM Minimalist available at Books and Courses. Works well with Play Books (read aloud function) and Apple Books.
(E. Robertson 2016) Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation
Program implementation -- failure and success factors: please see the resources I listed in Episode 3. 

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How can we roll out Enterprise Risk Management with a minimal footprint? 
Edited for length

Principles-based approach

1. value proposition (cost-benefit analysis) - principle: no big capital outlays; practitioners prove method through trials
2. execution - principle: gradual, organic growth, not command and control 
3. risk ID methods - principle: rigorous definitions and procedure; integrate with existing practice
4. policy, standard and governance - principle: minimal paperwork
5. benefits - principle: ascertain first direct short effects then later higher order outcomes

Summary: How do we maintain a minimal footprint in the implementation?

KEY QUOTE
“Program managers of new initiatives are under pressure to show results, and it is easy (but risky) to communicate promises rather than demonstrate the work. Focus on a low-key approach that relies on evidence of benefits.” (Solving the ERM Puzzle... p.75)

LINKS
Edited transcripts: The ERM Minimalist available at Books and Courses. Works well with Play Books (read aloud function) and Apple Books.
(E. Robertson 2016) Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation 

New website = riskcommentary.ca
Enterprise risk management implementation: Who is the champion?
Edited for length.

Significance of the Enterprise Risk Management champion 

• Who actually is leading this work? 
• What are the requisite qualifications and background? 
• Is any special training needed? 
• Background and qualities
• Functions

Principles of program success (discussed in full E15): 
A few success factors and their relation to ERM

Summary of traits of ERM champion

KEY QUOTE
”the ERM champion’s success in instituting ERM will not hinge on the degree of authority leveraged. The reason is that willing participation in genuine Enterprise Risk Management... is not a response to formal authority. It is an outcome of seeing the value of the new process.” (Robertson 2016, Solving the ERM Puzzle, p.24)

LINKS 

Edited transcripts:
The ERM Minimalist available at Books and Courses. Works well with Play Books (read aloud function) and Apple Books.
(E. Robertson 2016) Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation 

New website = riskcommentary.ca
High Quality Risk Assessment: What is the true significance of the risk register you’ve built so carefully? How does it lead to dramatic, breakthrough risk mitigation?

Facilitating risk assessment

• Risk register - the full significance
• What have we accomplished so far?
• Quality infused at each step
• Result: revelations in the perception of the risk profile

Breakthrough Risk Mitigation

• mitigation action that is truly “breakthrough” and dramatic
• expert participants 
• sorting on risk information 
• novel interpretation of risk profile: identify fundamental risks
• evidence-based decisions

Creativity and innovation

• introducing imaginative and unorthodox solutions
• taking it offline as special project
• do not short-change this part of the process

How is the risk register used going forward?

• transformed from a static snapshot to a dynamic management tool

Summary

KEY QUOTE
”Poorly understood chronic problems often have to do with the nebulous and difficult questions of communications and working relationships...” (Robertson, p.58, Section 2.5 Risk Mitigation and Review)

LINKS
 Do you need a risk matrix (risk register) or other templates for risk assessment? Enterprise Risk Management Tools and Templates 
(E. Robertson 2016) Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation 

New website = RiskCommentary.ca
High Quality Risk Assessment implies comprehensive risk identification and a sensible assessment using four key criteria. I share a generic methodology developed and refined over years with clients.

Review of the advantages of round table method
Risk identification - finer points of risk formulation 
Facilitation - finer points of facilitation
LIFT: Listen; Interpret; Formulate; Test
Risk assessment - four aspects
Summary

KEY QUOTE
Definition of High Quality Risk Assessment
“The comprehensive identification and analysis of phenomena that could prevent the achievement of objectives, or compromise associated values, of a researched and planned program, followed by a principled response.” (Solving the ERM Puzzle, p.11)

LINKS
 Do you need a risk matrix (risk register) or other templates for risk assessment? Enterprise Risk Management Tools and Templates 
(Robertson 2016) Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation
RIMS document, pdf download Exploring Risk Appetite and Risk Tolerance