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Enterprise risk management links to corporate strategy

Enterprise risk management links to corporate strategy

CHICAGO—Connecting an organization's strategy to its enterprise risk management program is a key to linking critical risks to corporate planning, according to a speaker at the fifth annual Enterprise Risk Management Conference in Chicago.

While ERM had established oversight, control and discipline to manage high-priority risks in a changing operating environment, something was amiss at his organization, said Charles Westrin, director of ERM for Phoenix-based Apollo Group Inc., the parent company of the University of Phoenix, at the conference Wednesday.

“We had a lot of the core tenets of what an ERM program was; however, we still didn't have the fundamental connection with the strategy. We felt like we were missing something,” Mr. Westrin said during a session.

Part of that was due to Apollo's sole focus on growth and services, particularly with its University of Phoenix operation, which currently has 330,000 students enrolled online and at campuses in 40 states, Mr. Westrin said.

Two and a half years ago, after facing significant regulatory changes, competition and management turnovers, the company decided to clearly define its strategy and focused on “how to make strategy and risk two sides of the same coin,” Mr. Westrin said.

When looking at the ERM and strategy processes, “we realized that there were a lot of common core elements that these processes have,” Mr. Westrin said, noting that ownership for key strategic initiatives and risk areas often overlapped.

The result was the integration of several key points shared between strategy and risk, which included identifying priorities, allocating ownership and resources, executing key enterprise projects and monitoring progress, he said.

Under the process, Apollo was able to address numerous regulations targeting the for-profit proprietary university sector.

“ERM and strategy acted as the center of excellence that pulled in the data and did the qualitative and quantitative analytics,” making it possible to present to management operational concerns, potential impact to students and the impact to earnings per share, he said.

From a regulatory challenge perspective, the integration of strategy and risk helped management understand what the strategic implications could be as well as the downside effects if not managed appropriately, Mr. Westrin said at the conference, which was produced by the Marcus Evans Group.

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