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Cautionary tales of Tiger and ERM


Will 2010 see continued progress toward the adoption of enterprise risk management approaches in public and private endeavors?

That's a question I've been pondering the past few weeks. At least a couple of news stories involve ERM issues, even though “enterprise risk management” appeared nowhere in the tales. And that should be of little surprise, given there is more than one definition of ERM in the risk management profession itself.

The general public doesn't even know the term ERM exists, but people are well aware of the saga of Tiger Woods. Here's a guy who had it all and effectively threw it all away. The stupidity of his “transgressions” beggars the imagination. With his personal life in shambles and sources of endorsement income drying up, the world's most famous golfer is in seclusion.

But what about the PGA Tour?

Here's where enterprise risk management comes into play. The tour became dependent on a superstar in a way no other sport can; no amount of extramarital betrayal on the part of, say, the best quarterback in the National Football League or top slugger in Major League Baseball would wreak existential harm on the sport itself.

But for a PGA Tour sans Tiger, the harm looks considerable. As someone who almost never watched golf on TV or even thought about attending tournaments before the rise of Tiger, I have the feeling I'm probably going to be watching a lot less golf this year.

This raises the ERM issue. While Tiger's success raised the status and revenues of the PGA Tour, its players and the organizations sponsoring PGA events, his downfall quite possibly threatens the future value that might have been created.

How can an organization like the PGA Tour deal beforehand with the possibility that its major draw will implode? In fact, can it plan ahead? Can there be contingency plans and, if so, what sort? How does the organization deal with a significant, and possibly long-term, loss of revenue and reputation?

I don't pretend to know the answers, but those are the types of questions I'm sure some ERM practitioners have been asking since the story broke.

Loss of revenue factors into the second exercise in enterprise risk management I've gleaned from the headlines of late. That is the continuing growth of the national debt. Deficits, scary as they are on a year-by-year basis, can be relatively short-term phenomena. Remember, it wasn't long ago that the country ran a surplus, thanks to the miracle of divided government. But when deficits build up year after year regardless of economic conditions, the problem becomes structural and truly frightening.

Could enterprise risk management supply some of the tools to deal with a growing national debt? I say “some of the tools” because there is no way a professional discipline alone can bring discipline to as undisciplined a group as Congress. After all, these are the people who spent prodigiously in good and bad times and, in doing so, helped bring about the bad times in which we're mired.

A good dose of enterprise risk management couldn't hurt here. While it wouldn't magically pay off the debt, an enterprise risk management approach could help identify areas in which government intervention isn't justified. It also could point out the risks of continuing to rack up debt increasingly held by foreign creditors—not all of which are kindly disposed to the United States—and suggest options for decreasing that exposure.

Enterprise risk management is no panacea, and I know some people who question whether it really exists. But anything that gets people and the institutions they've built to look at risk from multiple angles, with an eye to building value, is a most welcome thing. As comedian Ron White reminds us, “You can't fix stupid.” Maybe if you look at risk from the right angle, you can prevent stupid from causing harm.