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Risk managers implementing enterprise risk management programs at their organizations first must define what value their organizations will gain from ERM.
Commonalities for risk managers to demonstrate ERM’s value to senior leaders at their organization include enhanced reputation, improved credit scores, risk avoidance through hedging and insurance, elimination of silos, and the ability to assess risk across the organization, among others, panelists at the Risk & Insurance Management Society Inc.’s 50th conference in Philadelphia said during a session on ERM.
But failing to tie an ERM program to the organization’s strategic objectives can leave a hole in the value statement and can be the demise of the ERM program, said Carol Fox, New York-based director of strategic and enterprise risk practice for RIMS.
“Organizations are not only trying to protect value, but they’re really looking at how to create value for the organization—and you can do that through ERM,” Ms. Fox said during a session on ERM.
Panelists at the session offered attendees 10 steps to consider when initiating ERM programs at their organizations:
1. Define ERM’s value to organization.
2. Understand ERM standards and framework.
3. See what the organization is already doing.
4. Seek support and help.
5. Keep it simple.
6. Start small.
7. Go for quick “wins.”
8. Delegate “fixes” to risk owners.
9. Report on progress.
10. Develop “soft skills.”
Richard W. Sarnie, vp of risk management for Great Atlantic & Pacific Tea Co. Inc. in Montvale, N.J., stressed the importance of risk management departments spearheading ERM initiatives.
“The risk manager should be leading ERM efforts in your organizations,” he said, noting that risk managers should not be focused on just buying insurance.
“It’s the noninsurable risks that are taking companies down,” Mr. Sarnie said.
A critical step when implementing ERM is to keep it simple, avoiding insurance language and terminology that often leads to confusion, panelists said.
As the process can be complex and initially daunting, it’s important to have “people understand what they need to do or what they don’t need to do,” Ms. Fox said.
Mr. Sarnie recommended that risk managers start by questioning which risks can most adversely affect their organization.
“You need to start small. You want to demystify the process,” Mr. Sarnie said.