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CURIE 13 SEPTEMBER 2014 Mark Aiello Senior Vice President Practice - - PowerPoint PPT Presentation
CURIE 13 SEPTEMBER 2014 Mark Aiello Senior Vice President Practice - - PowerPoint PPT Presentation
KEY LEARNINGS IN ERM CURIE 13 SEPTEMBER 2014 Mark Aiello Senior Vice President Practice Leader Organizational Risk and Resilience Session Objectives Discuss key lessons learned Discuss / share common problems Marsh / CURIE
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KEY LEARNINGS IN ERM CURIE
13 SEPTEMBER 2014
Mark Aiello Senior Vice President Practice Leader – Organizational Risk and Resilience
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MARSH RISK CONSULTING
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Session Objectives
- Discuss key lessons learned
- Discuss / share common problems
- Marsh / CURIE Partnership
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Section #1
WHAT I HAVE LEARNED
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MARSH RISK CONSULTING
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QUESTIONS
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(The real) Section #1
WHAT I HAVE LEARNED
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Key Lessons
1. Building the Proper Foundation 2. Risk Measurement & Prioritization 3. Risk Appetite 4. Risk Management Communication and adoption 5. Integration of Risk Management – The Quest for Resiliency
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MARSH RISK CONSULTING
Building the Proper Foundation Many programs are developed without the thoughtful foundations
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Risk Management Process
The appropriate starting point Common starting point
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Building the Proper Foundation Lack of foundation creates instability in a risk management program
Challenges
- Program inefficiencies
- Conflicts
- Lack of direction
- Unsustainable process
- Ineffective risk management program
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MARSH RISK CONSULTING
Building the Proper Foundation Some very basic planning can help strengthen program foundations
Strategies
- Preliminary planning session
- Alignment of senior administration
- Development of governance structure
- Accountability and delegation of authority
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MARSH RISK CONSULTING
Risk Measurement & Prioritization Programs often evaluate macro risk on qualitative scales
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- Qualitative snapshot of the
perceived likelihood and impact
- Often based on 3, 5, 10 point
scales
- Risks evaluated at macro level
- Assessment values are often
consensus driven
- Prioritization often based on a
number of key assessment criteria
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MARSH RISK CONSULTING
- Evaluate macro risks, ignore risk drivers
– Risk Management strategies based at top level
- Consensus evaluation
– Subject matter experts (SME) vs. non-experts
- Focus on the ‘vote’
– Lack of focus on the issues
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Risk Measurement & Prioritization Key Challenges
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MARSH RISK CONSULTING
- Evaluate macro risks, ignore risk drivers
– Identify risk drivers – Evaluate material risk drivers / causal factors – Focus risk management activities at the driver level
- Consensus evaluation
– Conduct evaluation at SME level – Small group exercises
- Focus on the ‘vote’
– Focus on the conversation – Validate the evaluation
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Risk Measurement & Prioritization Strategies to deal with challenges
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MARSH RISK CONSULTING
Risk Measurement & Prioritization Risk must be measured against success / plans to be most impactful
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Many institutions fail to effectively link risk measurement to success measurement Challenge
Board / Senior Admin
Role
Deans Functional Leaders Department Heads Faculty Mid-level managers Operational staff
- What are the KPIs / success
metrics that resonate with different stakeholders in the institution?
- How does risk impact their ability
to achieve objectives?
- What types of risk are material to
different levels of stakeholders?
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MARSH RISK CONSULTING
Measuring Risk Creating effective metrics
- Risks metrics should align with deviations in desired performance metrics
- Risk measurements should be different at each level of the institution
- Materiality should relate to the ability and willingness to accept risk at each
level of the institution
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How this can help
- Helps to create a clear understanding of the actual relevance of risk at
different levels
- Fosters better engagement / buy-in at different levels
- Creates the foundations to make more effective / objective / consistent
risk management decisions and allocate resources (people, time, $) in the most appropriate manner
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MARSH RISK CONSULTING
Risk Appetite An effective Risk Appetite framework is a critical part of risk management planning
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- An organization’s framework of tolerances towards risk taking and
decision making – Includes financial metrics critical to support business strategy and planning – Also includes non-financial criteria for establishing agreed ‘risk capacity’ What is risk/
- pportunity
appetite? Why define a risk/ opportunity appetite?
- Align management risk-taking activities with risk perception and tolerances
- f stakeholders
- Clarify risk-return views of key stakeholders
- Facilitate / create freedom for “on-strategy” decision making and risk taking
How is it linked to the strategy?
- Derive maximum tolerable risk levels, both quantitative and qualitative,
based on stakeholder expectations/constraints and strategic objectives
- Define a set of limits for strategic key performance indicators and compare
them with the group risk exposure
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Risk Appetite Asking the right questions
- How well do we identify, document and evaluate the risks we face as a business?
- From your perspective, does our risk framework effectively relate to our
performance metrics allowing us to objectively incorporate risk into key decisions?
- Are there certain types of risk or specific risk for which we have zero tolerance (e.g.
Health & Safety, Environmental, Reputation impact)?
- How do we understand the risk expectations of our stakeholders?
- How could our ability to evaluate key decision improve with a better understanding
- f risk and the organization’s ability and willingness to accept risk?
- What is the current risk appetite of the institution?
- What are the key areas that we should consider in our risk appetite framework
(Enrolment, Reputation, Employee Health & Safety, Environment, Regulatory, etc.)
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Risk Appetite is not a single statement, but rather a framework to align better decision making
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MARSH RISK CONSULTING
Risk Management Communication Ineffective communication is the largest hurdle facing effective ERM programs
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“ THE SINGLE BIGGEST PROBLEM ABOUT COMMUNICATION IS THE ILLUSION THAT IT HAS TAKEN PLACE.” – GEORGE BERNARD SHAW
Key Challenges
- Stakeholder engagement
- Alignment of Enterprise / Operational risk management
- Reaching the target audience
- Perspectives - upside vs. downside
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MARSH RISK CONSULTING
Risk Management Communication Ineffective communication is the largest hurdle facing effective ERM programs
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Board / Senior Admin Functional / Departmental Intra- Departmental Task
Holistic institution wide review of risks (macro) Focused review of processes and tasks (micro)
Institutional Focus
How does language / communication need to change as you move down this path?
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Risk Management Communication - Speaking the Right Language Risk needs to be defined against relevant objectives to properly resonate
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Board / Senior Admin
Role Objectives
Deans Functional Leaders Department Heads Faculty Mid-level managers Operational staff
Strategic Plan Faculty Strategic Plan Functional Strategic Plans Departmental Tactical Plans Performance evaluations, scorecards, etc.
- Objectives at each level should be accretive and aligned with institutional
strategy
- Risk does not fundamentally change, however the context must change
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Creating a Common Language? Programs should focus less on a single set of terms and more on a single, consistent message
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- Common universal themes
- Fundamental definitions
- Tailored language for relevant stakeholders
How this can help
- Fosters better engagement / buy-in at different levels
- Creates a consistent baseline to identify (and eventually evaluate) risk
- Fosters integration of the various layers of the risk management program
- Creates the foundations to make more effective / objective / consistent
risk management decisions and allocate resources (people, time, $) in the most appropriate manner
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Using Effective Communication to Enable Risk Management
- Make risk management part of the conversation about institutional
management (it’s all one song) – Stakeholders inherently manage risk on a daily basis – why strip it out and make it more confusing?
- Change the conversation from the ‘negative’ (adverse events, losses,
costs, etc.) to the ‘positive’ – Effective risk management will increase the likelihood of achieving strategic and operational objectives
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Integration of Risk Management – The Quest for Resilience ERM is the tie that binds, risk management strategy
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Health & Safety Environment Capital Projects Insurance Enterprise Business Continuity
Entity Individual programs developed for specific purposes with no centralized strategy
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Integration of Risk Management – The Quest for Resilience ERM is a very simple concept
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Risk Enterprise Management
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Integration of Risk Management – The Quest for Resilience All risk management efforts should support organizational resilience
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A d v e r s e E v e n t !
Awareness
Prevention / Mitigation Planning Implementation / Training
Adapt / Operate Recovery Response Preparation
A d v e r s e E v e n t
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Section #2
KEY ISSUES IN HIGHER EDUCATION RISK MANAGEMENT
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Key Issues & Concerns
- What are you experiencing?
- What are the key challenges that you have faced?
– Past – Present
- What challenges do you foresee in the future?
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