ARiMI
–
Asia
Risk
Management
Ins0tute
By MARC RONEZ
Chief Risk Strategist & Master Coach
Asia Risk Management Institute
NOTES
BCM
vs
ERM
The
Business
Case
for
Integra9ng
Business
Con9nuity
&
Enterprise
Risk
Management
Business Continuity Management
Award 2013, 24 January 2013

Agenda
for
this
Session
Explore and discuss the ‘business case’ for integrating Business
Continuity Management (BCM) & Enterprise Risk Management
(ERM).
þ Conflicts & Competition between ERM & BCM functions
þ Comparing the ERM & BCM Frameworks, Process & Practices
þ Convergence of the ERM of BCM agendas
þ Understanding the life-cycle from Risk Issues to Business
Disruptions & Crises
þ Strengthening Value Creation & Sustainability by Integrating BCM &
ERM
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 2

3
Risks
&
Crises..
BCM
or
ERM
issues?
Terrorism Diseases
Earthquake
Pollution
Bank run
SubprimeExplosion
NGO
Attack Lawsuits
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013

Conflicts between ERM & BCM
VS ERMBCM
­ SEPARATE often COMPETING Functions in Organizations
­ OVERLAPPING area of Responsibilities
­ Different OBJECTIVES, Focus & METHODOLOGICAL
Approaches
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 4

Different Origins for ERM & BCM
VS ERMBCM
≠
IT departments,
with the IT Disaster
Recovery program
Insurance
Buying / Hazard
Risk Mgt
Both ERM & BCM have seen Tremendous SCOPE expansion
and methodological development
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 5

66
Financial & Hazard
Expanding
the
scope
of
ERM
Finance Losses
Operational Strategic
Protect & Sustain
Operations
Create Value with
effective Risk-taking
& ManagementScope
increase
➜ From Value PROTECTION to Value CREATION expanding to
all risk domains
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013

BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 7
ERM
Manage Risks & Opportunities
Effectively to Ensure Achievement of
Corporate Objectives

RISK
MANAGEMENT
IT
DISASTER
RECOVERY
FACILITIES
MANAGEMENT
SUPPLY
CHAIN
MANAGEMENT
QUALITY
MANAGEMENT
HEALTH
&
SAFETY
KNOWLEDGE
MANAGEMENT
EMERGENCY
MANAGEMENT
SECURITY
CRISIS
COMMUNICATIONS
&
PR
BCM - Business
Continuity Management
Expanding
the
scope
of
BCM
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 8
➜ From RECOVERY to CONTINUITY and from IT Processes to
ALL Operations & Business processes

BCM…
MAINTAIN KEY Business Operations
during challenging times
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 9

CATALYST
for
the
ERM
&
BCM
‘Explosion’!
A continuous and constant stream of crises and corporate
failures over the past 10-15 years have created a strong
momentum for Risk, Crisis & Business management concepts.
9/11
Fukushima
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 10

1111
The
ERM
&
BCM
Explosion!
Failures in managing risks effectively have triggered all
over the world, efforts by:
¤ regulators,
¤ rating agencies,
¤ stock exchanges,
¤ institutional investors
¤ and corporate governance oversight bodies
… insist that company senior management take greater
responsibility for managing proactively risks and
critical disruption on an enterprise-wide scale.
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013

ERM
&
BCM
Best
Prac9ces
&
Standards
BCM Standards
þ ISO 22301:2012 - Societal
security – Business continuity
management systems
(International)
þ BS 25999:2007 - Business
Continuity Management (BSI/
UK) 1 Code of Practice & 2
Specification
þ SS540:2008 - BCM
Framework & Technical
Reference (Singapore)
þ NFPA1600 - Standard on
Disaster/Emergency
Management and Business
Continuity Programs (ANSI/
US)
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 12
ERM Standards
þ ISO 31000:2009 - Risk
Management Guideline
(International)
þ COSO:2004 - Integrated ERM
Framework (US)
þ AS/NZS 4360:2004 - Risk
Management Standard
(Australia/NZ)
þ HM Treasury’s Orange Book:
2004 – Management of Risk
(UK)
þ Rating Agencies Frameworks
(S&P, Moodys)

ERM
vs
BCM
Area
of
Focus
&
Objec9ves
13
- +
Target
Performance
Expected
Potential
Losses
Expected
Potential
Opportunities
Unexpected
Catastrophic
Losses
Transformational
Blue swans
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013
Catastrophic
Losses
Black swans
Unexpected
Opportunities
LOSS GAIN
Risk Can Lead to either Negative or Positive impact depending
how it is managed..

ERM
vs
BCM
Area
of
Focus
&
Objec9ves
14
- +
Target
Performance
Expected
Potential
Losses
Expected
Potential
Opportunities
Unexpected
Catastrophic
Losses
Transformational
Blue swans
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013
Catastrophic
Losses
Black swans
Unexpected
Opportunities
ERM
–
Create
Shared
Sustainable
Value
BCM
–
Ensure
Business
Con9nuity
&
Societal
Security
LOSS GAIN

BCM
perspec9ve:
How
to
Define
Business
Con9nuity?
¤ Business Continuity is defined in British Standard
for BCM (BS 25999:2006) as:
“.. The capability of an organization to plan for and
respond to business interruptions in order to continue
business operations at an acceptable pre-defined
level”.
How to understand this definition?
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 15

Components
of
BS
25999
Defini9on
of
Business
Con9nuity
Key components in the definition:
① CAPABILITY to PLAN & RESPOND
② To BUSINESS INTERRUPTION Events
③ To MAINTAIN KEY Business Operations
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 16

Components
of
BS
25999
Defini9on
of
Business
Con9nuity
Key components in the definition:
① CAPABILITY to PLAN & RESPOND
➜ Planning & building readiness is essential
② To BUSINESS INTERRUPTION Events
➜ Focus on severe to critical threats
③ To MAINTAIN KEY Business Operations
➜ Focus on key processes and resources
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 17

What
is
Business
Con9nuity
Management
then.
¤ British Standard for BCM (BS 25999:2006) defines it as:
An “holistic management process that identifies
potential threats to an organization and the impacts to
business operations those threats, if realized, might
cause, and which provides a framework for building
organizational resilience with the capability for an
effective response that safeguards the interests of its key
stakeholders, reputation, brand and value-creating
activities.”
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 18

BCM
–
Business
Con9nuity
Management
Process...
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 19
1 - BCM
Program
Management
3 – DETERMINING
BCM
STRATEGIES
4 – DEVELOP &
IMPLEMENT BCM
RESPONSE
5 – EXERCISE,
MAINTAIN &
REVIEW
Delivering
better
RESULTS
2 – UNDERSTAND
THE
ORGANIZATION

BCM
process
–
Underlying
Focus
1 – Key Activities & FUNCTIONS
4 – Identify & Assess THREATS
The
Trash
Bin
3 – SCREEN based On CRITICALITY
Not
critical?
6 – EXERCISING, Maintenance &
Audit
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 20
5 – Design & Implement BCM
Response
2 – Business IMPACT Analysis

ERM
Perspec9ve:
How
to
Define
RISK?
¤ Risk is defined in ISO 31000: 2009 as:
“.. the effect of uncertainty on objectives”.
How to analyse this definition?
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 21

Components
of
ISO
31000
Defini9on
of
Risk
Key components in the definition:
① OBJECTIVES
② UNCERTAINTY EFFECTS
③ EXPOSURE to Uncertainty
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 22

Components
of
ISO
31000
Defini9on
of
Risk
Key components in the definition:
① OBJECTIVES
➜ Something important you want to achieve
② UNCERTAINTY EFFECTS
➜ Threats, Opportunities & Volatility. Can be the result of
our actions and others internal/external factors
③ EXPOSURE to Uncertainty
➜ (Your objectives and the processes and resources
that support them)
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 23

ISO
31
000
Guide
-­‐
Risk
Management
Process
3
–
Risk
Assessment
2
-­‐
Establish
the
Context
3.2
Risk
Analysis
5
–
Monitoring
&
Review
1
–
Communica9on
&
Consulta9on
3.1
Risk
Iden9fica9on
4
-­‐
Risk
Treatment
3.3
Risk
Evalua9on
Managers can optimize the tradeoff between Risk and Return..
while consistently and systematically, and ensuring the timely communication of
risk related information across the enterprise in a transparent manner.
…by identifying,
assessing and
assigning
ownership, taking
actions to mitigate
or anticipate risks,
and monitoring &
reviewing progress
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 24

ISO
31000
–
GUIDE
for
Managing
Risk
Principles Framework Process
2"–"Design"of"framework""
for"managing"
• Understanding+organiza.on+
• Risk+Management+policy+
• Integra.on+into+organiza.on+
• Accountability+
• Resources+
• Establish+Internal/External+
Context+
1"–"Mandate"&"
Commitment"
5"–"Con8nual"improvement"
of"the"framework"
3"–"Implemen8ng"Risk"
Management"
• Implemen.ng+the+Framework+
• Implemen.ng+the+Risk+
Management+Process+
4"–"Monitoring"&"Review"of"the"
Framework"
3"–"Risk"Assessment"
2"."Establish"the"Context"
3.2"Risk"Analysis"
5"–"Monitoring"&""
Review"
1"–""
CommunicaCon"
&"ConsultaCon"
3.1"Risk"IdenCficaCon"
4"."Risk"Treatment"
3.3"Risk"EvaluaCon"
!
1)!creates!value.!
2)!is!an!integral!part!of!organiza6onal!
processes.!!
3)!is!part!of!decision!making.!!
4)!explicitly!addresses!uncertainty.!!
5)!is!systema6c,!structured!and!6mely.!!
6)!is!based!on!the!best!available!
informa6on.!!
7)!is!tailored.!!
8)!takes!human!and!cultural!factors!into!
account.!!
9)!is!transparent!and!inclusive.!!
10)!is!dynamic,!itera6ve!and!responsive!
to!change.!!
11)!facilitates!con6nual!improvement!and!
enhancement!of!the!organiza6on.!!
!
ERM is the System, Methodology & processes used by organizations to takes
risk in a controlled manner so that the business is viable for a longer term
(SUSTAINABILITY) while meeting the expectations of the stakeholders by
CREATING SHARED VALUE in line with Corporate OBJECTIVES.
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 25

ERM
process
–
Underlying
Focus
4 – Identify & Assess THREATS
Based on Likelihood & Impact
1 – Corporate OBJECTIVES
& Risk APPETITE
The
Trash
Bin
3 – SCREEN based on
LIKELIHOOD × IMPACT
Low
Priority
9 - Review & MONITORING (KRIs)
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 26
8 – Design & Implement ERM
Controls

27
In
SUMMARY:
Comparing
BCM
and
ERM
BCM ERM
Primary Focus Key Functions (Processes &
resources)
Key Corporate Objectives & Risk
Appetite
Protected Areas Balance sheet & reputation P&L, Cash flows & Market Capitalization
Operational
Objectives
Ensure Crisis & Business Continuity
preparedness (Exercising, testing)
Risk awareness & cost of risk control.
Continuous process improvement,
effective risk decision-making
Time Horizon of
Assessment
Medium to long-term Short to Medium
Critical Dimension
of Risk focus
The Business IMPACT The LIKELIHOOD
Type of Loss
Exposure under
watch
Severe to Catastrophic (High Impact)
with medium to low frequency
business interruptions
Expected Losses: High to medium
frequency loss events with medium to
severe impact
Strategic
Objectives
Ensure Continuity of Critical
Operations
Ensure Achievement of Corporate
Objectives
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013

Nega9ve consequences of the lack of
integration between ERM & BCM activities
­ Unhealthy Competition for Management Attention &
Resources
­ Double works & Uncoordinated/independent efforts to
deal with the same risk issues
­ Resulting in waste and inefficiencies (increased
expenses, both programs are expensive & wrong
focus)
­ Increasing risk of critical failure to management risk
and ensure business sustainability
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 28

BCM
is
a
NATURAL
part
of
an
ERM
framework..
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 29
You
could
see
Business
Con9nuity
Management
(BCM)
as…
Part
of
the
management
RESPONSE
to
an
important
risk
issue…
taking
its
place
during
the
Treatment
phase
alongside
with
risk
Preven9on
&
Transfer.

Pressure
Time
Potential Emerging Current Recovering
Life-­‐cycle
from
a
Risk
issue
to
a
Crisis
–
4
phases
Media Coverage
& amplification
Signal
CRISIS
Incident
OR Signal
Issues
Signal
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 30

Example: BP oil spill, Gulf of Mexico 2010
­ The catastrophe resulted in a loss of:
– Direct Cost to BP: Over $20 billion
– Market capitalization loss. i.e. cost to shareholders:
$87 billion
¤ BP explosion and oil spill could have been prevented
with additional spending of $7 - $12 million on safety
controls
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 31

Pressure
Time
Potential Emerging Current Recovering
From
Risk
issue
to
Crisis:
BP
Gulf
of
Mexico
2010
Media Coverage
& amplification
Signal
CRISIS
Issues
Signal
Opportunity to influence Difficult to influence
Maintenance
equipment
Reports
Problems
Drop from
news
Enormous
cost &
damage to
reputation
Incident
OR Signal
Explosion
Stop the
leak &
cleaning
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 32
Emergency
evacuation &
protection
Media
onslaught

Impact
on
BP
share
price
/
market
capitaliza9on
Gulf of
Mexico
Disaster
MTBE
Contamination
lawsuits
$243 Billions
$90 Billions
Enormous Shareholder Value Loss
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 33

Pressure
Time
Potential Emerging Current Recovering
Life-­‐cycle
from
a
Risk
issue
to
a
Crisis
Signal
CRISIS
Incident
OR Signal
Issues
Signal
Opportunity to influence Difficult to influence
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 34
Time for
ACTION
REACTION
Too Late!

Road
Map
to
Managing
Risk
&
Crisis:
The
steps
35BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013

36
Pressure
Time
Potential Emerging Current Recovering
Road
Map
to
Managing
Risk,
Crisis
&
Change
Signal
CRISIS
Incident
OR Signal
Issues
Signal
Opportunity to influence Difficult to influence
Media Coverage
& amplification
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013

Cover
all
the
bases!
3
7
- +
Target
Performance
Expected
Potential
Losses
Expected
Potential
Opportunities
Unexpected
Catastrophic
Losses
Transformational
Blue swans
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013
Catastrophic
Losses
Black swans
Unexpected
Opportunities
LOSS GAIN
Shareholders
and
Management
are
typically
concerned
with
variability
below
&
above
the
target
You
should
also
be
looking
out
for
cri9cal
NEW
Changes
in
the
Biz
environment
Organisa9ons
should
also
be
concerned
with
catastrophic
risks
&
the
risk
of
Insolvency

Road
Map
to
Managing
Risk
&
Crisis:
The
Solu9ons
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 38

How
ERM
&
BCM
can
add
value
to
each
other?
BCM can provide ERM with:
þ A better understanding of the critical activities (processes) and the
infrastructure & resources that support these with the BIA
þ A stronger focus on exercising and testing the risk mitigation framework
þ Promotes a better understanding communication dependency between
critical functions
ERM can provide BCM with:
þ A broader view of risk issues
þ A better definition of Corporate Objectives & understanding of Risk
Appetite
þ Systematic approach of consistently and continuously monitoring and
managing risk
þ A better view of any emerging threats and promotes cross functional
communication of key threats
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 39

What
is
preven9ng
effec9ve
coordina9on
&
integra9on
between
ERM
&
BCM?
­ Obstacle type 1: Resisting because of a cognitive
difference of opinion about BCM & ERM mission,
objectives, methodology & tools.
­ Obstacle type 2: Resistance due to emotional issues
(Fears, ego, etc)
­ Obstacle type 3: Resistance due to Political or Personal
issues ( Animosity, red tape, etc)
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 40

In
conclusion:
Three
Models
for
ERM
and
BCM
in
a
organiza9on
There are three different models for ERM & BCM in Organization:
­ STATUS QUO - is to maintain separate silos for both disciplines
with different teams, reporting lines, methodologies, etc.
þ COORDINATION – by having a central management unit/
function coordinating for both BCM and ERM activities.
þ INTEGRATION – by integrating BCM functionally &
methodologically into the ERM framework.
­ Unfortunately, the STATUS QUO model is what many
organizations are doing today. It is more than time for change!
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 41

Marc
Ronez
-­‐
Chief
Risk
Strategist
&
Knowledge
Leader
at
ARiMI
-­‐
Asia
Risk
Management
Ins9tute
An ERM & Governance expert with 20 years of experience both as a practitioner &
trainer for large MNCs, Governments & Charities. Marc has an MBA from the
University of Chicago GSB, an MSc in Insurance & a LLM from the University of La
Sorbonne
What do I do? Help managers & leaders to use Risk Management to:
þ Resolve difficult operational and business challenges
þ Take & manage risks effectively to build sustainable & profitable growth models
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013
Marc’s specific areas of expertise include ERM, risk decision-making processes,
corporate governance, Business Ethics, Social Responsibility, risk-aware culture,
risk communication and crisis management, business model/Strategy Risk
Management, corporate learning systems development.
42

Risk
Management
is
a
con/nuous
journey,
not
a
des/na/on!
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013
Marc Ronez is on Linked in & WordPress
You can find his profile & read his blogs at:
P: sg.linkedin.com/pub/marc-ronez/1/3b6/465/
B: theriskmanagementparadox.com
B: riskmanagementdemystified.com
43

ARiMI
–
Asia
Risk
Management
Ins9tute
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 44

ARiMI
is
an
applied
research
and
business
studies
ins0tute
that
was
set
up
in
2003
(in
partnership
with
NUS)
and
has
established
itself
as
the
Ins0tute
of
Reference
for
Enterprise
Risk
Management
studies
in
Singapore
and
in
the
region.
We
FOCUS
on
programs:
1. For
Decision-­‐Makers
(Middle
to
Top
Management):
Developing
PRACTICAL
Knowledge
&
Skills
in
Risk
&
Crisis
Management
2. For
Organiza9ons:
Building
CAPABILITIES
for
Sustainable
and
Profitable
Growth
by
EMBEDDING
Risk
Aware
&
Crisis
Readiness
Culture
ARiMI,
Asia
Risk
Management
Ins9tute
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 45

ARiMI
-­‐
Focus
and
Exper9se
● Crisis management &
Business Continuity
● Leadership risk decision-
making and Social Capital
● Reputational Risk &
stakeholders management
● Corporate governance &
business ethics
Research
● Professional Designation
Programs
CERM (Certified
Enterprise Risk Manager),
CPRM (Certified
Professional Risk
Manager), ARM
(Associate in Risk
Management), FSRM
(Fellow in Strategic Risk
Management)
● Public Seminars and
Workshops
● Corporate Training &
learning Programs
Education
● Risks & Opportunities
Assessment & Mapping
● Crisis & Business
Continuity Mgt
● Reputation Risk Mgt &
CSR (Corporate Social
Responsibility)
● Fraud Risk Mgt
● Risk Appetite & Risk
Aware Culture Readiness
● Project risk management
● Risk Champions
MasterClass
Expertise
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013 46

47
For more information on ARiMI,
check our website at:
www.arimi.org
BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013

Important Note: Please note that that this presentation and its
contents, is the intellectual property of the Asia Risk Management
Institute Pte Ltd. It has been prepared for this BCM Award session
and it cannot be used for any other purposes without the specific
written consent of the Asia Risk Management Institute.
48BCM vs ERM – Marc Ronez - Copyright @ ARiMI 2013