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It takes a team to execute effective ERM program


Texas Roadhouse Inc.'s enterprise risk management program has allowed employees throughout the chain to take ownership of the company's various risks, the architect of the program says.

In 2005, Patrick Sterling, senior director of risk and legendary people, worked to create several teams and committees that discuss risks for Texas Roadhouse restaurants and ideas for solving or mitigating those problems.

Mr. Sterling said he wanted to create an ERM structure for Texas Roadhouse as he learned about best practices in risk management during his early days with the company. The approach gives Texas Roadhouse a platform to discuss risk management regularly with stakeholders in the restaurant chain, he said.

Texas Roadhouse's ERM teams fall under a central risk committee that meets quarterly and deals with issues such as food safety, wage and hour compliance, business continuity, crisis situations, responsible alcohol service, leadership development and information technology.

The risk committee, which has eight to 12 members at any given time, includes three restaurant operators and company executives in various departments, including the audit department, IT, human resources, legal and public relations, Mr. Sterling said.

“By having everyone in the room, especially operators, it's been pretty effective,” he said.

The committee has been crucial in getting all levels of Texas Roadhouse employees to buy in to the company's risk management culture, said Keith Humpich, senior director of internal audit for Texas Roadhouse.

“We've been really trying to drive the risk management culture throughout the company, and not just here at the support center,” said Mr. Humpich, who co-leads Texas Roadhouse's overall risk committee with Mr. Sterling.

Mr. Sterling's decision to include input from restaurant partners has helped ensure that they can actively participate in Texas Roadhouse's risk management processes, said Rick Kaskel, a Providence, Rhode Island-based regional market partner responsible for about 150 Texas Roadhouse restaurants in Maine, Wisconsin, Georgia and other states.

Risk is “more top-of-mind today than it was 10 years ago, and way more top-of-mind than it was 17 years ago when I started,” said Mr. Kaskel, who is a committee member. “(Mr. Sterling) basically almost singlehandedly created the risk committee and created the awareness around potential risks we have.”

Mr. Sterling said the committee identifies potential problems for Texas Roadhouse and allows it to mitigate threats.

One risk committee meeting included a presentation from the company's food safety team, which identified hand washing as critical for the company's restaurants.

That presentation resulted in a year-long training program that emphasized proper hand-washing procedures, which Mr. Sterling said continues to this day.

“It's a very small thing, but it's one of those things that have a huge impact,” Mr. Sterling said.

The committee also has executed exercises that have helped Texas Roadhouse prepare for handling crises, Mr. Sterling said.

That has included annual drills to determine how to handle a cyber threat, such as stolen customer credit card data, and a joint exercise with Texas Roadhouse's top food distributor to prepare for supply chain disruption or foodborne illness issues.

“They're such an important partner to us that we want to make sure we have the right communication protocols so we don't get sideways in a crisis situation,” Mr. Sterling said of the food distributor exercise.

Scott Colosi, president and chief financial officer with Texas Roadhouse, said Mr. Sterling has “enormous credibility” with the company's leadership, which listens closely when Mr. Sterling's ERM team discusses potential risks with them.

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