I recently attended the Enterprise Risk Management Roundtable Summit in North Carolina held by NC State University that included representatives from Harley Davidson and Caterpillar among the speakers. This summit helped me gain insight into the emerging importance of a comprehensive risk management program and different strategies the companies have implemented.
Rob Gould, Director of Internal Audit, at Harley Davidson presented on the topic of utilizing Black Swan events to enhance the overall strategic risk management program for his organization. He emphasized that the goal of these exercises is to work through "finding the unexpected before it finds us." In addition, he discussed the importance of not assuming that all risks are negative but to, also, look at potential benefits of risk.
The representative from Caterpillar, Dr. Eng Seng Loh, discussed the goal of their risk management process, which is to facilitate strategic conversation within the company. This allows for the process to be embedded in and aligned with Caterpillar's culture. He also discussed three different time horizons that they focus on:
- Short Term Risks - 0-2 years - Enables the organization to deliver the business plan
- Emerging Risks - 2-5 years
- Long Term Risks - Risks that could change their competitive advantage in the market place
One of the interesting ways that Caterpillar embraces risk management is by incorporating the key risks and the strategies to mitigate them into the Chairman of the Board's SMART goals.
The common theme that resonated through the summit and was expressed by all attendees was the importance of first establishing a critical framework that adapts to the culture of the specific business in order to ensure the success of an Enterprise Risk Management program. One of the ways to work through this is to use a “bottom up” approach, in which the Director level of the company first identifies the specific risks to their unit. Once the above is established, the Executive level meets to discuss the likelihood and impact of these risks in order to determine what the top 5-8 risks for the organization are and how they will be mitigated. To finalize the process, the Executive leaders provide the risks and mitigation strategies to the Audit Committee alongside the risk owner who will be implementing the solution, so that there is full accountability.
At the ALS Group, we also feel that putting together a thoughtful Enterprise Risk Management framework will set the tone and drive the process. We have experience and knowledge in tailoring risk management programs that are unique to each company and align with their specific strategic goals. Contact me at 732.394.4252 or email@example.com for more information on how we can assist your organization with implementing Enterprise Risk Management strategy.