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ARiMI	–	Asia	Risk	Management	Institute	
By MARC RONEZ
Chief Risk Strategist & Knowledge Leader
ARIMI-Asia Risk Management Institute
NOTES	
CFO Asia Exchange Singapore
8th October 2015
ERM:	Re-Focusing	Your	Risk																																	
Management	Strategy	&	Practices
2
What	have	the	following	organizations	in	COMMON?	
­ They suffered heavy losses, some even
collapsed BUT …..
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
3
What	have	the	following	organizations	in	COMMON?	
­ They also had comprehensive Risk
Management Systems in Place !
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 4
Is the current approach to Risk Management
adopted in organizations WORKING?
Does the Troubles of
organizations such as
AIG, BP, Toyota,
TEPCO, Wolkswagen
& many others..
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 5
..necessarily represent
a FAILURE of Risk
Management?
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 6
Well, to define a failure of risk management …	
…. we must first have a clear understanding of what
should be..
the ROLE and the LIMITATIONS of risk
management.
7Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
8
ARiMI	Survey	on	ERM	Strategies	&	Practices	2012:		
A	mismatch	due	to	Inadequate	Focus	&	Low	Maturity
Typical ERM program
SCOPE of coverage
Not
covered!
Not needed!
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
RISK Environment
ARiMI	Survey	on	ERM	Strategies	&	Practices	2012	–	
Some	of	the	KEY	FINDINGS	
­  Most organizations still view risk management from a narrow Compliance
or Safety perspective
­  The Risk management function has little or no real participation in the
strategic planning process
­  The Risk management function is primarily focused on tangible assets &
and operational process level risk issues.
­  The often-stated “focus on risk culture” is more a matter of form than
substance
­  Risk Identification & Assessment tools used are overly qualitative &
subjective missing out key risk issues & connections
­  And more…
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 9
Agenda	for	this	Session		
Refocusing	ERM:	5	Directions			
þ 1. Shifting the focus from Value PROTECTION to problem
solving & Value CREATION
þ 2. Supporting Risk Control SYSTEMS with strong Risk
Management CULTURE
þ 3. Expanding focus from Creating SHAREHOLDERS Value
to Creating STAKEHOLDERS SHARED Value
þ 4. Shifting focus from SHORT-term profit to LONG-term
sustainable performance by improving Risk Identification
& Assessment Tools
þ 5. Ensuring Crisis Management PREPAREDNESS vs
relying on fire-fighting by integrating ERM with BCM
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 10
1 – Shifting the Focus from Value
PROTECTION to Problem-Solving
& Value CREATION
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 11
Main	groups	of	reasons	given	to	explain	ERM	
initiatives	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 12
PR – Public Relations
Compliance
Protection
Operating Performance
Value Creation &
Optimization
73.33%
26.67%
Ronez, M (2012), “Risk Management Strategies & Practices in Asia”, Survey,
Asia Risk Management Institute - ARiMI
Wrong	Focus	of	Risk	Management	Initiatives	
­ What is still driving risk management..
þ Answering regulatory changes and other external pressures
þ Monitoring & controlling the “Expected Losses”
þ Reducing the cost of Risk Financing focusing on Insurance
Leads to a narrow Box-ticking approach to Risk management
¤ What should be driving risk management..
þ Improving strategy formulation, planning & execution
þ Addressing emerging risk issues & avoiding “Black Swans”
þ Optimizing the risk/return allocation & cost of capital
þ Ensuring long-term sustainability of the organization
Leads to Risk management that drives enterprise value
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 13
14
Greater
Sophistication
Protection &
Continuity Identifying, avoiding & managing own organisation’s crises
Integrating corporate governance standards
Operating
Performance
Understanding the full range of risks facing the organization
Understanding and evaluating operational risks
Achieving global best practices
Protecting corporate reputation
Value Creation
& optimization Enhancing Reputation and building competitive
advantage
Improving returns through Value creation-based Risk /
Return management & enhancing capital allocation
Levels	in	ERM	Maturity	–	ARiMI	Maturity	Continuum	
Compliance
Complying with legal requirements
Complying with corporate governance standards
Avoiding personal liability failure
Public
Relation
Surface system & PR Risk Communication
Reassuring stakeholders
Source: “Risk Management Practices in Asia”, Marc Ronez, ARiMI, Survey 2012
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
ERM	&	Strategic	Decision-Making	
INTEGRATING risk management into the strategic
planning & decision-making process of an organization
should be considered to be a very essential component of any
ERM projects.
The RATIONALE is… simply that since Taking Risk is in the
nature of Business…
…. Understanding & Managing Risks proactively is
therefore INHERENT to Strategic Planning.
Furthermore most other operational, financial and even
hazards risks an organization face derive from strategic
decisions.
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 15
Nothing Ventured,
Nothing Gained !
TAKING RISK is NECESSARY ..
… to GAIN REWARDS
16Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
17
A	STRATEGY	is	a	„Road	Map“	that	provides	a	
Pathway	from	CURRENT	REALITY	to	VISION	
Time
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
VISION
Where you want
to Be? (Possible
Future)
INGREDIENTS
Resources, Capital,
People, Culture,
SystemsSTRATEGY
How to get
There?
RISKS
RECIPE
Processes, Structure,
Marketing, Products,
Pricing, Distribution.
TODAY
CURRENT
POSITION
Where are you
Now?
“Strategy is how to get from where
you are now to where you want to
be!”
A Strategy defines and articulates the value proposition that an
organization brings to its market – a description of its business model.
Changes	in	the	Tranportation	Industry:		
What	is	NEXT	to	come?	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 18
YESTERDAY TODAY TOMORROW
Horse drawn
vehicle
Modern Cars
?
Where are we
coming from ?
Where are we
Now ?
Where are we
Going to be ?
Managers	can	optimize	the	tradeoffs…		
	between	Risk	and	Return.	
HOW? Making Informed Decisions!
… by identifying, analysing & measuring risks consistently
and systematically, and ensuring the timely
communication of risk related information across the
enterprise in a transparent manner.
How? Having the Right Solutions!
… by designing, Implementing and monitoring effective
CONTROLS supported by appropriate cultural values to
optimize the management of risks in the organization
19Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Enterprise-Wide	Risk	Management	(ARiMI)	
Performance	Management	
Risk	Management	
Knowledge	&	
Information		
Management	
20Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
It is essential to connect Performance & Risk Management as
they are the “2 faces of the same coin!”
2 – Supporting Risk Control
SYSTEMS with a strong Risk
Management CULTURE
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 21
Root causes for many Organization's Problems?
The examinations that followed each of these cases, and
others, revealed some common themes behind the
institutions‘ troubles i.e. The People’s Factor!:
­ high-profile scandals involving unethical abuse of
corporate power due to greed and conflict of Interests;
­ In a number of cases, fraudulent/criminal activities by
corporate officers;
­ A lack of responsibility, accountability and oversight of
corporate operations at every level of management;
­ An inherent Blindness and human Complacency to Risk;
­ A people issue circumventing control systems in place..
22Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Incompetence,	Lack	of	Ethics,	Fraud	&	Responsibility	
of	Leaders	–	A	few	examples	among	many…	
Ken Lay, Enron Chuck Prince, CEO Citi
Group
TT Durai, NKF
Bernie Ebbers
WorldCom
Dick Fuld,
Lehman Bros
Alan Greenspan,
Chairman FED
Madoff, Investment
Ramalinga Raju,
Satyam
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 23
Why	Cultural	Change	is	important?	
Organizational
Changes
Which consists of
changes in structures,
processes, systems and
technologies.
ERM Success
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Cultural
Changes
Which consists of changing
the mental models, attitude
and behaviour of people in
your organization
There are
fundamentally two
types of change that
your organisation will
face when embarking
on an ERM program
24
Why	Cultural	Change	is	important?	
Organizational
Changes
Which consists of
changes in structures,
processes, systems and
technologies.
ERM Failure
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
No focus on
Cultural
Changes
Unfortunately most
organizations focus
essentially on the
organizational change
25
Corporate	Culture:	Tacit	&	Intersubjective	Collective	
Behavior	Guide	
Images & representations of how we
perceive and understand the reality
around us
Predisposition or a tendency to respond
positively or negatively towards a certain
idea, object, person, or situation
The state or process of doing something,
typically to achieve an aim.
A consequence, effect, or outcome of
something i.e. actions, circumstances, etc
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 26
MENTAL MODELS
ATTITUDE
ACTIONS
RESULTS
Values, Culture & Risk Management	
Your corporate culture to support Good and Effective risk
management practices and achieve core objectives must
have integrated the following values/principles:
þ Think in terms of Shared Value and Sustainability
þ Act with Integrity and Discipline
þ Be Responsible & Accountable for what they do
þ Be Open & Transparent about how they do things
þ Share information and knowledge proactively
Ø If it has not, poor performance and ultimately failure
is inevitable
27Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
“To	educate	a	man	in	knowledge	but	NOT	in	morals	
is	to	create	a	menace	to	society.	“	
Theodore	Roosevelt,	USA	president	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 28
3 – Expanding focus from Creating
SHAREHOLDERS Value to
Creating STAKEHOLDERS
SHARED Value
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 29
Clarifying	your	Value	Chain	&	Competitive	Context	
Key Partners:
(Supply
Chain)
Raw Materials,
Goods &
Services
Competitors
& New Entrants
YOUR
ORGANIZATION
Key Partners:
(Routes to
Markets, Channels)
Distributors,
Complementors,
Vendors, etc.
Customers
(Segments &
Profiles)
Prospectivecustomers
Substitutes
Source: Marc Ronez – Asia Risk Management Institute
Who are your competitors and what is the intensity of the competition in your marketplace.
How easy is it to enter your industry? Are there substitutes products /services that can
answer the needs of your customer just as effectively?
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 30
Corporate	Governance	&	Social	Responsibility:	
Aligning	Stakeholders’	Rising	&	Diverging	Interests	
Government
& Regulators
ORGANIZATION
External Auditors
Rating Agencies
Customers
Shareholders
/ Investors
coverage and pressure
groups scrutiny
Decisions to
invest or to
hold its shares
Regulatory
Framework
& control
Competitors’
behaviors
Lending funds
& at what rate
Partners
/Suppliers
Competitors
Media / Public
/ Pressure Groups
Lenders
Management/
Employees
Audit
requirements
Ratings
requirements
Needs met or
not
supply at
what price
productive
or not
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 31
Importance	of	considering	ALL	Relevant	Stakeholders	
Stakeholders
Shareholders
Customers
Debt holders
Employees
Rating Agencies
Governments
Others
Stakeholders
Expectations
Financial related
Objectives
Revenue growth
Profit
Shareholder Value
Targeted Rating
…
Non-Financial
Social Responsibility
Regulatory Compliance
Knowledge Management
Community involvement
…
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 32
The	Objective	of	Risk	Management	is	that	…	
.. an organisation takes risk KNOWINGLY and
manage risk exposure INTELLIGENTLY
.. in a controlled (or balanced) manner so that the
business is viable for a longer term (SUSTAINABILITY)
while meeting the expectation of all the relevant
stakeholders by CREATING SHARED VALUE
(i.e., shareholders, customers/policyholders, employees,
regulators, rating agencies, suppliers, etc).
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 33
4 – Shifting Focus from SHORT-
term profit to LONG-term
sustainable performance by
improving Risk Identification &
Assessment Tools
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 34
The job of risk management is to ensure that
…	
­ …. top management are aware of and understands the
possible positive & negative outcomes and associated
probabilities of their organization’s strategy..
­ .. BEFORE they make decisions to commit their
organization’s resources on various projects & initiatives.
­ .. And that the organization has (or will develop) the
Capabilities to deal with any “Surprises” that may
come its way now and into the future!
35Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Risk	Management	Process	-	ARiMI	Example	
4	–	SOLUTION	/	TREATMENT	
	
	
	
	
	
1	-	DIAGNOSTIC	
Establish the Context
Identify Risks
Analyze Risks
3 – Evaluation &
Decisions
about Risk
5	-		
MONITOR		
&		
AUDIT	
2	–		
SHARE	
&	
CONSULT	
First	of	all,	assess	(identify	and	evaluate)	the	risks	faced	by	
the	firm		within	the	strategic	&	operational	context	
Secondly,	
communicate	the	
assessment	of	these	
risks	to	senior	
management	&	BOD	
to	decide	which	risks	
to	take	and	not	to	
take.	
Fourthly,	implement	
mitigations	and	control	
strategies	to	reduce	risk	
level	and/or	transfer	the	
cost	of	it.	
Finally,	monitor	&	
manage	those	risks	to	
ensure	the	firm	bears	
only	the	risks	its	
management	and	board	
want	to	be	exposed	to.		
Thirdly,	evaluate	risk	&	make	the	
decisions	about	the	risks	you	want	to	
take	and	the	ones	you	don’t.	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 36
Develop & Implement
Exercise & Embed
Risk	Management	Process	-	A	lot	of	Things	can	go	
WRONG!		
4	–	SOLUTION	/	TREATMENT	
	
	
	
	
	
1	-	DIAGNOSTIC	
Establish the Context
Identify Risks
Analyze Risks
3 – Evaluation &
Decisions
about Risk
5	-		
MONITOR		
&		
AUDIT	
2	–		
SHARE	
&	
CONSULT	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 37
Develop & Implement
Exercise & Embed
2 - Mismeasurement of known risks
3- Failure in
communicating
risks to top
management
4 - Failure in setting the right Risk
Appetite
6 - Failure in
monitoring and
managing risks
7 - Failure to use
appropriate risk
metrics
1 - Failure to identify or to take
known risks into account
5 - Failure in implementing Risk
Management Solutions
Nassim	Taleb,	Author	of	the	“Black	Swan	Theory”	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 38
“Many highly popular MODELS used to identify and
assess Risk are … deeply FLAWED”
What	is	the	time	horizon	covered	by	typical	risk	
assessments?	
39Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
KPMG Risk Management Survey 2011
Too	Short-term	Focus	of	Assessment	dilute	&	hide	
the	REAL	Exposure	to	RISK	
40
?
Can I go on a
5-day hiking
trip in the
mountains?
Day 1
Sun
Day 2 Day 3
Weather Forecast
Day 1
Cloudy
Rain
Sun
Day 2 Day 3
Day 1
CloudySun
Day 2 Day 3
? ?
?
Day 4 Day 5
Rain
Day 2 Day 3
Day 2 Day 3
? ?
??
Rain
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
41
COSO
	"Simplistic”	Assessment	Methodology	
9
6
3
6
4
2
3
2
1
V Low (1) Low (2) Med (3)
Impact
Med(3)
Low (2)
V Low (1)
Likelihood
1284
12
8
4
High (4)
16High (4)
$ 0
Operational
Failures
Likelihood
Magnitude of Loss
RCSA Risk Map
Terrorist Attack
L=1 & I=4
Risk Score = 4 (Yellow)
LOW Priority
Actual Risk Distribution
Terrorist
Attack
Operational Failure
L=4 & I=2
Risk Score = 8 (Orange)
SIGNIFICANT Priority
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
BLIND	SPOTS	on	Black	Swans	in	existing	Models	
42
- +
You should also
be concerned
with the TAIL
risks leading to
Insolvency
Shareholders and
Management are typically
concerned with variability
below the target
Target
Performance
Expected
Potential
Losses
Expected
Opportunities
Unexpected
Catastrophic
Losses
Black swans
You should also
be looking out
for critical NEW
Changes in the
Biz environment
Unexpected
Opportunities
Black swans
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
LOSS GAIN
Abusing	the	Use	of	the	Bell	Curve	
43
- +
Expected
Target
Performance
Worst Expected Best
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Different Risks have a
wide range and shapes of
probability distributions
44
Risk IGNORANCE
Risk AWARENESS
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Adopting	a	Methodology	&	Tools	that	allow	you	to	
more	objectively	look	at	Risk	in	longer-term	
perspective	
45Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
5 – Ensure Risk Management
PREPAREDNESS vs FIRE-
FIGTHING by intergrating ERM
with BCM & Crisis Management
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 46
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
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 47
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
­ 11 workers dead
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 48
BP platform explosion and oil spill could have been
prevented with additional spending of $7 - $12 million on
safety Controls. BUT the Investigation report noted that
focus was on cost and time savings
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
equipments
Reports
Problems
Drop from
news
Enormous
cost &
damage to
reputation
Incident
OR Signal
Explosion
Stop the
leak &
cleaning
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 49
Emergency
evacuation &
protection
Media
onslaught
Crisis Management without Proper Preparation is
like… trying to put ‘Lipstick’ …
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 50
..on a Wild and Angry Gorilla!
Impact	on	BP	share	price	/	market	capitalization	
Gulf of
Mexico
Disaster
MTBE
Contamination
lawsuits
$243 Billions
$90 Billions
Enormous Shareholder Value Loss
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 51
Pressure
Time
Potential Emerging Current Recovering
Life-cycle	of	from	a	Risk	Issue	to	a	Crisis	
Signal
CRISIS
Incident
OR Signal
Issues
Signal
Opportunity to influence Difficult to influence
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 52
Time for
ACTION
REACTION
Too Late!
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 53
PREPAREDNESS is ESSENTIAL
For Effective Crisis Management
54
Pressure
Time
Potential Emerging Current Recovering
The impact of Risk & Crisis Management
Signal
CRISIS
Incident
OR Signal
Issues
Signal
Opportunity to influence Difficult to influence
Media Coverage
& amplification
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Time
Potential Emerging Current Recovering
Road	Map	to	Managing	Risk	&	Crisis	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 55
Risk Diagnostic Risk
Treatment
Monitoring &
Detection
Recognition &
intervention
Emergency
crisis response
Recovery , analysis &
Learning
Business	Continuity	(business	processes,	Supply	Chain)	
Emergency	Response		
Crisis	Communications		Risk	Communications		
Disaster	Recovery	(IT	services)	
Emergency	preparedness	
Risk	Financing	
Risk	Optimization	
Contingency	Financing	
BC	Preparedness	
1	–	Corporate		
Objectives	
	
2	–	Key	Processes	
&	Resources	
	
3-	BIA	
	
4-	Threats	&		
Opportunities		
Analysis	
	
5-	Risk	appetite		
&		Tolerance	
	 DR	Preparedness	
Before After
Strategic	change	
Incident
56
If a company manage the crisis properly there actually may
be beneficial outcomes beyond survival and preservation of
corporate value:
1.  Increased visibility and name recognition.
2.  An opportunity to show competency and leadership.
3.  Improved relations with important stakeholders’
groups, such as employees and customers.
4.  Lessons can be learned and changes made to prepare
for future crises.
5.  Increased competitive advantage against less well
prepared competitors
Managing	a	Crisis	well	-	Benefits	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
ERM,	Strategic	Planning	&	BCM	Overlaps	&	
Gaps	
57
- +
Target
Performance
Expected
Potential
Losses
Expected
Potential
Opportunities
Unexpected
Catastrophic
Losses
Transformational
Blue swans
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Catastrophic
Losses
Black swans
Unexpected
Opportunities
BCM		
LOSS GAIN
SP	-	Strategic	
Planning	
ERM
SP	–	Strategic	Planning	
Develop	opportunities	
&	create	value	
BCM	–	Ensure	Business	
Continuity	&	Societal	
Security		
	INTELLIGENT	ERM	with	Strategic	Planning,	
Operational	Management	&	BCM	
58
- +
Target
Performance
Expected
Potential
Losses
Expected
Potential
Opportunities
Unexpected
Catastrophic
Losses
Transformational
Blue swans
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Catastrophic
Losses
Black swans
Unexpected
Opportunities
ERM	–	Create	Shared	Sustainable	Value	
LOSS
Operational	
Management	
GAIN
Building Intelligent ERM systems & culture
þ Think Strategically & Longer-term if you want to be
sustainable (business model & adequate risk financing)
þ Use the appropriate methodologies and tools to
understand your risk profile as you take risk to get
returns to avoid unmanaged exposure to large losses
þ Nurture an Ethical and Risk-Aware Culture to support
resilience & the capacity to Learn and Change.
þ Recruit & promote people with the right values & culture
þ Develop a real Risk-adjusted Performance Management
system to motive people to take risk effectively
þ Integrate with ERM & Strengthen your crisis & business
continuity programs. Stress-test your systems regularly.
59Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Marc	Ronez	-	Chief	Risk	Strategist	&	
Knowledge	Content	Leader	at	ARiMI	-	Asia	
Risk	Management	Institute	
An ERM & Governance expert with over 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
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Marc’s specific areas of expertise include ERM, risk decision-making processes,
data analytics, corporate governance, business ethics, social responsibility, risk-
aware culture, risk communication and crisis management, business model/strategy
risk management, corporate learning systems development.
60
Risk	Management	is	a	continuous	journey,	not	a	
destination!	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Marc Ronez is on Linked in & WordPress
You can find his profile & read his blogs at:
P: www.linkedin.com/in/marc-ronez
B: theriskmanagementparadox.com
B: riskmanagementdemystified.com
61
ARiMI	–	Asia	Risk	Management	Institute	
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 62
ARiMI	is	an	applied	research	and	business	studies	institute	that	
was	set	up	in	2003	(in	partnership	with	NUS)	and	has	established	
itself	as	the	Institute	of	Reference	for	Enterprise	Risk	Management	
studies	in	Singapore	and	in	the	Asia	region.		
	
We	FOCUS	on	programs:	
	
1.  For	Decision-Makers	(Middle	to	Top	Management):	
Developing	PRACTICAL	Knowledge	&	Skills	in	Risk	&	Crisis	
Management	
	
2.  For	Organizations:	Building	CAPABILITIES	for	Sustainable	
and	Profitable	Growth	by	EMBEDDING	Control	Systems	
with	a	Risk	Aware	&	Crisis	Readiness	Culture	
ARiMI,	Asia	Risk	Management	Institute		
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 63
ARiMI	-	Focus	and	Expertise	
● Crisis management &
Business Continuity
● Leadership risk decision-
making and Social Capital
● Reputational Risk &
stakeholders management
● Corporate governance &
business ethics
● Business Innovation &
Corporate Transformation
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 Expertise
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 64
● Risks Analytics & Decision-
making
● Crisis & Business
Continuity Mgt
● Reputation Risk Mgt & CSR
● Business Ethics, Fraud
Risk & Compliance Mgt
● Risk Appetite & Risk Aware
Culture Readiness
● Project risk management
● ERM Design &
Implementation
● Innovation & Change Mgt
● Information & Cyber Risk
Mgt
65
For more information on ARiMI,
check our website at:
www.arimi.org
Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
Developing Effective Leaders & Decision-
makers for complex & volatile times
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 CFO Exchange 2015
session and it cannot be used for any other purposes without the
specific written consent of the Asia Risk Management Institute.
66Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015

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CFO Asia Exchange Singapore 2015 Refocusing your ERM strategy and practices - Marc Ronez presentation

  • 1. ARiMI – Asia Risk Management Institute By MARC RONEZ Chief Risk Strategist & Knowledge Leader ARIMI-Asia Risk Management Institute NOTES CFO Asia Exchange Singapore 8th October 2015 ERM: Re-Focusing Your Risk Management Strategy & Practices
  • 2. 2 What have the following organizations in COMMON? ­ They suffered heavy losses, some even collapsed BUT ….. Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 3. 3 What have the following organizations in COMMON? ­ They also had comprehensive Risk Management Systems in Place ! Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 4. Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 4 Is the current approach to Risk Management adopted in organizations WORKING?
  • 5. Does the Troubles of organizations such as AIG, BP, Toyota, TEPCO, Wolkswagen & many others.. Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 5
  • 6. ..necessarily represent a FAILURE of Risk Management? Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 6
  • 7. Well, to define a failure of risk management … …. we must first have a clear understanding of what should be.. the ROLE and the LIMITATIONS of risk management. 7Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 8. 8 ARiMI Survey on ERM Strategies & Practices 2012: A mismatch due to Inadequate Focus & Low Maturity Typical ERM program SCOPE of coverage Not covered! Not needed! Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 RISK Environment
  • 9. ARiMI Survey on ERM Strategies & Practices 2012 – Some of the KEY FINDINGS ­  Most organizations still view risk management from a narrow Compliance or Safety perspective ­  The Risk management function has little or no real participation in the strategic planning process ­  The Risk management function is primarily focused on tangible assets & and operational process level risk issues. ­  The often-stated “focus on risk culture” is more a matter of form than substance ­  Risk Identification & Assessment tools used are overly qualitative & subjective missing out key risk issues & connections ­  And more… Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 9
  • 10. Agenda for this Session Refocusing ERM: 5 Directions þ 1. Shifting the focus from Value PROTECTION to problem solving & Value CREATION þ 2. Supporting Risk Control SYSTEMS with strong Risk Management CULTURE þ 3. Expanding focus from Creating SHAREHOLDERS Value to Creating STAKEHOLDERS SHARED Value þ 4. Shifting focus from SHORT-term profit to LONG-term sustainable performance by improving Risk Identification & Assessment Tools þ 5. Ensuring Crisis Management PREPAREDNESS vs relying on fire-fighting by integrating ERM with BCM Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 10
  • 11. 1 – Shifting the Focus from Value PROTECTION to Problem-Solving & Value CREATION Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 11
  • 12. Main groups of reasons given to explain ERM initiatives Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 12 PR – Public Relations Compliance Protection Operating Performance Value Creation & Optimization 73.33% 26.67% Ronez, M (2012), “Risk Management Strategies & Practices in Asia”, Survey, Asia Risk Management Institute - ARiMI
  • 13. Wrong Focus of Risk Management Initiatives ­ What is still driving risk management.. þ Answering regulatory changes and other external pressures þ Monitoring & controlling the “Expected Losses” þ Reducing the cost of Risk Financing focusing on Insurance Leads to a narrow Box-ticking approach to Risk management ¤ What should be driving risk management.. þ Improving strategy formulation, planning & execution þ Addressing emerging risk issues & avoiding “Black Swans” þ Optimizing the risk/return allocation & cost of capital þ Ensuring long-term sustainability of the organization Leads to Risk management that drives enterprise value Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 13
  • 14. 14 Greater Sophistication Protection & Continuity Identifying, avoiding & managing own organisation’s crises Integrating corporate governance standards Operating Performance Understanding the full range of risks facing the organization Understanding and evaluating operational risks Achieving global best practices Protecting corporate reputation Value Creation & optimization Enhancing Reputation and building competitive advantage Improving returns through Value creation-based Risk / Return management & enhancing capital allocation Levels in ERM Maturity – ARiMI Maturity Continuum Compliance Complying with legal requirements Complying with corporate governance standards Avoiding personal liability failure Public Relation Surface system & PR Risk Communication Reassuring stakeholders Source: “Risk Management Practices in Asia”, Marc Ronez, ARiMI, Survey 2012 Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 15. ERM & Strategic Decision-Making INTEGRATING risk management into the strategic planning & decision-making process of an organization should be considered to be a very essential component of any ERM projects. The RATIONALE is… simply that since Taking Risk is in the nature of Business… …. Understanding & Managing Risks proactively is therefore INHERENT to Strategic Planning. Furthermore most other operational, financial and even hazards risks an organization face derive from strategic decisions. Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 15
  • 16. Nothing Ventured, Nothing Gained ! TAKING RISK is NECESSARY .. … to GAIN REWARDS 16Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 17. 17 A STRATEGY is a „Road Map“ that provides a Pathway from CURRENT REALITY to VISION Time Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 VISION Where you want to Be? (Possible Future) INGREDIENTS Resources, Capital, People, Culture, SystemsSTRATEGY How to get There? RISKS RECIPE Processes, Structure, Marketing, Products, Pricing, Distribution. TODAY CURRENT POSITION Where are you Now? “Strategy is how to get from where you are now to where you want to be!” A Strategy defines and articulates the value proposition that an organization brings to its market – a description of its business model.
  • 18. Changes in the Tranportation Industry: What is NEXT to come? Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 18 YESTERDAY TODAY TOMORROW Horse drawn vehicle Modern Cars ? Where are we coming from ? Where are we Now ? Where are we Going to be ?
  • 19. Managers can optimize the tradeoffs… between Risk and Return. HOW? Making Informed Decisions! … by identifying, analysing & measuring risks consistently and systematically, and ensuring the timely communication of risk related information across the enterprise in a transparent manner. How? Having the Right Solutions! … by designing, Implementing and monitoring effective CONTROLS supported by appropriate cultural values to optimize the management of risks in the organization 19Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 20. Enterprise-Wide Risk Management (ARiMI) Performance Management Risk Management Knowledge & Information Management 20Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 It is essential to connect Performance & Risk Management as they are the “2 faces of the same coin!”
  • 21. 2 – Supporting Risk Control SYSTEMS with a strong Risk Management CULTURE Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 21
  • 22. Root causes for many Organization's Problems? The examinations that followed each of these cases, and others, revealed some common themes behind the institutions‘ troubles i.e. The People’s Factor!: ­ high-profile scandals involving unethical abuse of corporate power due to greed and conflict of Interests; ­ In a number of cases, fraudulent/criminal activities by corporate officers; ­ A lack of responsibility, accountability and oversight of corporate operations at every level of management; ­ An inherent Blindness and human Complacency to Risk; ­ A people issue circumventing control systems in place.. 22Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 23. Incompetence, Lack of Ethics, Fraud & Responsibility of Leaders – A few examples among many… Ken Lay, Enron Chuck Prince, CEO Citi Group TT Durai, NKF Bernie Ebbers WorldCom Dick Fuld, Lehman Bros Alan Greenspan, Chairman FED Madoff, Investment Ramalinga Raju, Satyam Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 23
  • 24. Why Cultural Change is important? Organizational Changes Which consists of changes in structures, processes, systems and technologies. ERM Success Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 Cultural Changes Which consists of changing the mental models, attitude and behaviour of people in your organization There are fundamentally two types of change that your organisation will face when embarking on an ERM program 24
  • 25. Why Cultural Change is important? Organizational Changes Which consists of changes in structures, processes, systems and technologies. ERM Failure Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 No focus on Cultural Changes Unfortunately most organizations focus essentially on the organizational change 25
  • 26. Corporate Culture: Tacit & Intersubjective Collective Behavior Guide Images & representations of how we perceive and understand the reality around us Predisposition or a tendency to respond positively or negatively towards a certain idea, object, person, or situation The state or process of doing something, typically to achieve an aim. A consequence, effect, or outcome of something i.e. actions, circumstances, etc Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 26 MENTAL MODELS ATTITUDE ACTIONS RESULTS
  • 27. Values, Culture & Risk Management Your corporate culture to support Good and Effective risk management practices and achieve core objectives must have integrated the following values/principles: þ Think in terms of Shared Value and Sustainability þ Act with Integrity and Discipline þ Be Responsible & Accountable for what they do þ Be Open & Transparent about how they do things þ Share information and knowledge proactively Ø If it has not, poor performance and ultimately failure is inevitable 27Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 29. 3 – Expanding focus from Creating SHAREHOLDERS Value to Creating STAKEHOLDERS SHARED Value Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 29
  • 30. Clarifying your Value Chain & Competitive Context Key Partners: (Supply Chain) Raw Materials, Goods & Services Competitors & New Entrants YOUR ORGANIZATION Key Partners: (Routes to Markets, Channels) Distributors, Complementors, Vendors, etc. Customers (Segments & Profiles) Prospectivecustomers Substitutes Source: Marc Ronez – Asia Risk Management Institute Who are your competitors and what is the intensity of the competition in your marketplace. How easy is it to enter your industry? Are there substitutes products /services that can answer the needs of your customer just as effectively? Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 30
  • 31. Corporate Governance & Social Responsibility: Aligning Stakeholders’ Rising & Diverging Interests Government & Regulators ORGANIZATION External Auditors Rating Agencies Customers Shareholders / Investors coverage and pressure groups scrutiny Decisions to invest or to hold its shares Regulatory Framework & control Competitors’ behaviors Lending funds & at what rate Partners /Suppliers Competitors Media / Public / Pressure Groups Lenders Management/ Employees Audit requirements Ratings requirements Needs met or not supply at what price productive or not Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 31
  • 32. Importance of considering ALL Relevant Stakeholders Stakeholders Shareholders Customers Debt holders Employees Rating Agencies Governments Others Stakeholders Expectations Financial related Objectives Revenue growth Profit Shareholder Value Targeted Rating … Non-Financial Social Responsibility Regulatory Compliance Knowledge Management Community involvement … Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 32
  • 33. The Objective of Risk Management is that … .. an organisation takes risk KNOWINGLY and manage risk exposure INTELLIGENTLY .. in a controlled (or balanced) manner so that the business is viable for a longer term (SUSTAINABILITY) while meeting the expectation of all the relevant stakeholders by CREATING SHARED VALUE (i.e., shareholders, customers/policyholders, employees, regulators, rating agencies, suppliers, etc). Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 33
  • 34. 4 – Shifting Focus from SHORT- term profit to LONG-term sustainable performance by improving Risk Identification & Assessment Tools Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 34
  • 35. The job of risk management is to ensure that … ­ …. top management are aware of and understands the possible positive & negative outcomes and associated probabilities of their organization’s strategy.. ­ .. BEFORE they make decisions to commit their organization’s resources on various projects & initiatives. ­ .. And that the organization has (or will develop) the Capabilities to deal with any “Surprises” that may come its way now and into the future! 35Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 36. Risk Management Process - ARiMI Example 4 – SOLUTION / TREATMENT 1 - DIAGNOSTIC Establish the Context Identify Risks Analyze Risks 3 – Evaluation & Decisions about Risk 5 - MONITOR & AUDIT 2 – SHARE & CONSULT First of all, assess (identify and evaluate) the risks faced by the firm within the strategic & operational context Secondly, communicate the assessment of these risks to senior management & BOD to decide which risks to take and not to take. Fourthly, implement mitigations and control strategies to reduce risk level and/or transfer the cost of it. Finally, monitor & manage those risks to ensure the firm bears only the risks its management and board want to be exposed to. Thirdly, evaluate risk & make the decisions about the risks you want to take and the ones you don’t. Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 36 Develop & Implement Exercise & Embed
  • 37. Risk Management Process - A lot of Things can go WRONG! 4 – SOLUTION / TREATMENT 1 - DIAGNOSTIC Establish the Context Identify Risks Analyze Risks 3 – Evaluation & Decisions about Risk 5 - MONITOR & AUDIT 2 – SHARE & CONSULT Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 37 Develop & Implement Exercise & Embed 2 - Mismeasurement of known risks 3- Failure in communicating risks to top management 4 - Failure in setting the right Risk Appetite 6 - Failure in monitoring and managing risks 7 - Failure to use appropriate risk metrics 1 - Failure to identify or to take known risks into account 5 - Failure in implementing Risk Management Solutions
  • 38. Nassim Taleb, Author of the “Black Swan Theory” Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 38 “Many highly popular MODELS used to identify and assess Risk are … deeply FLAWED”
  • 39. What is the time horizon covered by typical risk assessments? 39Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 KPMG Risk Management Survey 2011
  • 40. Too Short-term Focus of Assessment dilute & hide the REAL Exposure to RISK 40 ? Can I go on a 5-day hiking trip in the mountains? Day 1 Sun Day 2 Day 3 Weather Forecast Day 1 Cloudy Rain Sun Day 2 Day 3 Day 1 CloudySun Day 2 Day 3 ? ? ? Day 4 Day 5 Rain Day 2 Day 3 Day 2 Day 3 ? ? ?? Rain Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 41. 41 COSO "Simplistic” Assessment Methodology 9 6 3 6 4 2 3 2 1 V Low (1) Low (2) Med (3) Impact Med(3) Low (2) V Low (1) Likelihood 1284 12 8 4 High (4) 16High (4) $ 0 Operational Failures Likelihood Magnitude of Loss RCSA Risk Map Terrorist Attack L=1 & I=4 Risk Score = 4 (Yellow) LOW Priority Actual Risk Distribution Terrorist Attack Operational Failure L=4 & I=2 Risk Score = 8 (Orange) SIGNIFICANT Priority Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 42. BLIND SPOTS on Black Swans in existing Models 42 - + You should also be concerned with the TAIL risks leading to Insolvency Shareholders and Management are typically concerned with variability below the target Target Performance Expected Potential Losses Expected Opportunities Unexpected Catastrophic Losses Black swans You should also be looking out for critical NEW Changes in the Biz environment Unexpected Opportunities Black swans Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 LOSS GAIN
  • 43. Abusing the Use of the Bell Curve 43 - + Expected Target Performance Worst Expected Best Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 Different Risks have a wide range and shapes of probability distributions
  • 44. 44 Risk IGNORANCE Risk AWARENESS Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 46. 5 – Ensure Risk Management PREPAREDNESS vs FIRE- FIGTHING by intergrating ERM with BCM & Crisis Management Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 46
  • 47. 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 Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 47
  • 48. 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 ­ 11 workers dead Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 48 BP platform explosion and oil spill could have been prevented with additional spending of $7 - $12 million on safety Controls. BUT the Investigation report noted that focus was on cost and time savings
  • 49. 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 equipments Reports Problems Drop from news Enormous cost & damage to reputation Incident OR Signal Explosion Stop the leak & cleaning Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 49 Emergency evacuation & protection Media onslaught
  • 50. Crisis Management without Proper Preparation is like… trying to put ‘Lipstick’ … Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 50 ..on a Wild and Angry Gorilla!
  • 51. Impact on BP share price / market capitalization Gulf of Mexico Disaster MTBE Contamination lawsuits $243 Billions $90 Billions Enormous Shareholder Value Loss Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 51
  • 52. Pressure Time Potential Emerging Current Recovering Life-cycle of from a Risk Issue to a Crisis Signal CRISIS Incident OR Signal Issues Signal Opportunity to influence Difficult to influence Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 52 Time for ACTION REACTION Too Late!
  • 53. Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 53 PREPAREDNESS is ESSENTIAL For Effective Crisis Management
  • 54. 54 Pressure Time Potential Emerging Current Recovering The impact of Risk & Crisis Management Signal CRISIS Incident OR Signal Issues Signal Opportunity to influence Difficult to influence Media Coverage & amplification Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 55. Time Potential Emerging Current Recovering Road Map to Managing Risk & Crisis Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 55 Risk Diagnostic Risk Treatment Monitoring & Detection Recognition & intervention Emergency crisis response Recovery , analysis & Learning Business Continuity (business processes, Supply Chain) Emergency Response Crisis Communications Risk Communications Disaster Recovery (IT services) Emergency preparedness Risk Financing Risk Optimization Contingency Financing BC Preparedness 1 – Corporate Objectives 2 – Key Processes & Resources 3- BIA 4- Threats & Opportunities Analysis 5- Risk appetite & Tolerance DR Preparedness Before After Strategic change Incident
  • 56. 56 If a company manage the crisis properly there actually may be beneficial outcomes beyond survival and preservation of corporate value: 1.  Increased visibility and name recognition. 2.  An opportunity to show competency and leadership. 3.  Improved relations with important stakeholders’ groups, such as employees and customers. 4.  Lessons can be learned and changes made to prepare for future crises. 5.  Increased competitive advantage against less well prepared competitors Managing a Crisis well - Benefits Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 57. ERM, Strategic Planning & BCM Overlaps & Gaps 57 - + Target Performance Expected Potential Losses Expected Potential Opportunities Unexpected Catastrophic Losses Transformational Blue swans Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 Catastrophic Losses Black swans Unexpected Opportunities BCM LOSS GAIN SP - Strategic Planning ERM
  • 59. Building Intelligent ERM systems & culture þ Think Strategically & Longer-term if you want to be sustainable (business model & adequate risk financing) þ Use the appropriate methodologies and tools to understand your risk profile as you take risk to get returns to avoid unmanaged exposure to large losses þ Nurture an Ethical and Risk-Aware Culture to support resilience & the capacity to Learn and Change. þ Recruit & promote people with the right values & culture þ Develop a real Risk-adjusted Performance Management system to motive people to take risk effectively þ Integrate with ERM & Strengthen your crisis & business continuity programs. Stress-test your systems regularly. 59Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015
  • 60. Marc Ronez - Chief Risk Strategist & Knowledge Content Leader at ARiMI - Asia Risk Management Institute An ERM & Governance expert with over 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 Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 Marc’s specific areas of expertise include ERM, risk decision-making processes, data analytics, corporate governance, business ethics, social responsibility, risk- aware culture, risk communication and crisis management, business model/strategy risk management, corporate learning systems development. 60
  • 61. Risk Management is a continuous journey, not a destination! Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 Marc Ronez is on Linked in & WordPress You can find his profile & read his blogs at: P: www.linkedin.com/in/marc-ronez B: theriskmanagementparadox.com B: riskmanagementdemystified.com 61
  • 62. ARiMI – Asia Risk Management Institute Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 62
  • 64. ARiMI - Focus and Expertise ● Crisis management & Business Continuity ● Leadership risk decision- making and Social Capital ● Reputational Risk & stakeholders management ● Corporate governance & business ethics ● Business Innovation & Corporate Transformation 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 Expertise Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 64 ● Risks Analytics & Decision- making ● Crisis & Business Continuity Mgt ● Reputation Risk Mgt & CSR ● Business Ethics, Fraud Risk & Compliance Mgt ● Risk Appetite & Risk Aware Culture Readiness ● Project risk management ● ERM Design & Implementation ● Innovation & Change Mgt ● Information & Cyber Risk Mgt
  • 65. 65 For more information on ARiMI, check our website at: www.arimi.org Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015 Developing Effective Leaders & Decision- makers for complex & volatile times
  • 66. 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 CFO Exchange 2015 session and it cannot be used for any other purposes without the specific written consent of the Asia Risk Management Institute. 66Re-focusing ERM Strategy & Practices – Marc Ronez - Copyright @ ARiMI 2015