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Enterprise Risk Management

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Resolver Inc.
Resolver Inc.

Time Inc., the publisher of iconic magazines and related web platforms such as Time, Fortune, People, Sports Illustrated, and many others, spun out of Time Warner Inc. in 2014 to become a stand-alone publicly traded company. As part of that spin, Time Inc. established its own Internal Audit and Enterprise Risk Management (ERM) functions. This presentation covers first-hand information on the efforts, challenges, successes and pitfalls of Time Inc.’s ERM journey. You will take away valuable information including tools and templates that you can put to use in your own organization. Presentation by: Russ Charlton, SVP – Internal Audit and Enterprise Risk Management, Time Inc.

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ERM – Table of Contents 2 • Executive Summary • Executive Risk Committee Risk Assessment • Top Risks/Risk Model • Appendix Enterprise Risk Management Page
3 ERM Executive Summary In addition to updatingour top risks and related mitigation efforts through discussions with the key members of management charged with managingthose risks (see appendix pages X-X) we also conducted our first Executive Risk Committee facilitated meeting. The goals of that meeting were to: • Align on the importance of risk management at ABC Inc. • Discuss/debate the key risks facing the company. • Gain executive consensus as to the key risk and their potential likelihood, impact and trend. The outcome of that meeting was unanimous agreement as to the top three risks facing the company (see page X) • Risk One • Risk Two • Risk Three Additionally, the committee added Risk X (see page X) to the list of top risks and requested that we expand Y Risk to include Z Risk. The X risk previously focused on the development of a, b and c. Z risk includes one two and three, among other things. Though these risks are similar in nature, they have different mitigatingstrategies, therefore, for ease of clarity, we have added Z risk as an additional risk (see page X), but recognize that both risks, combined, make up the overall X risk to the company. Enterprise Risk Management
4Enterprise Risk Management Risks Risk Statement Enterprise Risk Management– 1 2 3 4 5 6 7 8 9 10 11 12 14 15 13
Enterprise Risk Management – Fall 2016 Assessment Low High Impact Likelihood 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 5Enterprise Risk Management 1 23 4 5 6 7 8 9 10 11 12 14 15 16 High Executive Risk Committee’s “Top Three” Risks Middle Tier of Top Risks Lower Tier of Top Risks Requires significant and sustained management attention Increasing Stable Decreasing Color of horizontal bar indicates risk trend rating 13 Risk Trend
Top Risks Mapped to the ABC Inc. Risk Model Risks 6Enterprise Risk Management In addition to “rating” our top risks as to impact and likelihood, it is also helpful to map each risk to its primary risk “sources.” For our purposes we use the ABC Inc. Risk Model risks, a set of 34 business risks divided into four categories – Strategic, Financial, Operational and Compliance. While Diagram One (shown full size on the following page) may be a bit difficult to read, when the diagram is deconstructed by top risk, as in Diagram Two, it becomes a very useful tool to help management understand the true nature of the risk. For example, at ABC Inc., abc risk is primarily driven by our our portfolio, customer behavior, organizational structure and talent risks (see page 8). Diagram One Diagram Two
7 StrategicRisks Top Risks Mapped to the ABC Inc. Risk Model Risks Board Effectiveness Business Model & Portfolio Competitor Image & Branding Customer Behavior Organization Structure & Culture Sovereign/Political Technological Innovation Intellectual Property and License Financial Accounting & Reporting Credit Currency Liquidity Capital Availability Investment Valuation/Effectiveness Authority/Limit Budget, Planning & Monitoring Business Interruption Channel Effectiveness Communications Infrastructure Access Integrity Talent Product Pricing Supply Chain Health, Safety & Environment Ethical Behavior Information Security Internal Control Evaluation Regulatory Illegal Acts Third-party Fraud Shareholder Expectations & Financial Market (4) (11) (1) (15) (12) (5) (6) (8) (10) (3) (7) (9) (2) (13) (14) Top Risks FinancialRisks OperationalRisksComplianceRisks Risk Drivers Risk Drivers
8 StrategicRisks Top Risks Mapped to the ABC Inc. Risk Model Risks Board Effectiveness Business Model & Portfolio Competitor Image & Branding Customer Behavior Organization Structure & Culture Sovereign/Political Technological Innovation Intellectual Property and License Financial Accounting & Reporting Credit Currency Liquidity Capital Availability Investment Valuation/Effectiveness Authority/Limit Budget, Planning & Monitoring Business Interruption Channel Effectiveness Communications Infrastructure Access Integrity Talent Product Pricing Supply Chain Health, Safety & Environment Ethical Behavior Information Security Internal Control Evaluation Regulatory Illegal Acts Third-party Fraud Shareholder Expectations & Financial Market (4) FinancialRisks OperationalRisksComplianceRisks Top RisksRisk Drivers Risk Drivers
Appendix 9 • Executive Risk Committee • Risk Rating Scale • Risk Trending Scale • Individual Risk Pages Enterprise Risk Management
10Enterprise Risk Management Executive Risk Committee Executive Title President & CEO Chief Operating Officer and President - Digital EVP & Chief Financial Officer EVP & President, Corporate Development, New Ventures & Investments EVP, Consumer Marketing EVP & Chief Revenue Officer CEO, ABC Inc. UK EVP, Chief Human Resources and Communications Officer EVP & General Counsel Chief Content Officer SVP, Global Technology Services SVP, Chief Auditor (non-voting)
Enterprise Risk Management Likelihood Impact Financial Qualitative Examples Very Likely >X% Critical • Severe impact on the ABC Inc. brand resulting in major reductions in subscriptions/readership/ad buys. • Termination or reduction in executive leadership positions and/or 10-20% reduction in global workforce. • Unsustainable loss of multiple key talent. Likely X%-X% High • Significant impact on the ABC Inc. brand resulting in substantial reductions in subscriptions/readership/ad buys. • Termination or reduction in senior management positions and/or 5%-10% reduction in global workforce. • Loss of several key talent. Possible X%-X% Medium • Moderate impact on the ABC Inc. brand resulting in painful ,but manageable, reductions in subscriptions/readership/ad buys. • Termination or reduction in management positions and/ or up to 5% reduction in global workforce. • Loss of some key talent. Unlikely <X% Low • Little impact on ABC Inc. brand resulting in little to no incremental reductions in subscriptions/readership/ad buys. • Insignificant terminations or reduction in personnel. • Minimal loss of key talent. Enterprise Risk Management Risk Rating Scales 11 Impact rating may be based on financial, qualitative, or both
Enterprise Risk Management Risk Trend Increasing The threat to the company, despite mitigating efforts, is expected to increase; the overall environment is becoming more risky. Stable to moderate increase The threat to the company, inclusive of mitigating efforts, is generally remaining the same, but it appears that the overall environment is becoming more risky. Stable The threat to the company, inclusive of mitigating efforts, is remaining the same. Stable to moderate decrease The threat to the company, inclusive of mitigating efforts, is generally remaining the same, but it appears that the overall environment may become less risky. Decreasing The threat to the company, inclusive of mitigating efforts, is decreasing through a combination of improved mitigating efforts and/or an improvement in the overall risk environment. Enterprise Risk Management Risk Trending Scale 12
13Enterprise Risk Management Enterprise Risk Management Risk Summary Risk Title Risk Statement Executive Sponsor Likelihood Likely Key Management Impact Critical Category Risk Trend Increasing Risk Synopsis • x. Mitigation Efforts • X. 1

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Enterprise Risk Management

  • 1.
  • 2. ERM – Table of Contents 2 • Executive Summary • Executive Risk Committee Risk Assessment • Top Risks/Risk Model • Appendix Enterprise Risk Management Page
  • 3. 3 ERM Executive Summary In addition to updatingour top risks and related mitigation efforts through discussions with the key members of management charged with managingthose risks (see appendix pages X-X) we also conducted our first Executive Risk Committee facilitated meeting. The goals of that meeting were to: • Align on the importance of risk management at ABC Inc. • Discuss/debate the key risks facing the company. • Gain executive consensus as to the key risk and their potential likelihood, impact and trend. The outcome of that meeting was unanimous agreement as to the top three risks facing the company (see page X) • Risk One • Risk Two • Risk Three Additionally, the committee added Risk X (see page X) to the list of top risks and requested that we expand Y Risk to include Z Risk. The X risk previously focused on the development of a, b and c. Z risk includes one two and three, among other things. Though these risks are similar in nature, they have different mitigatingstrategies, therefore, for ease of clarity, we have added Z risk as an additional risk (see page X), but recognize that both risks, combined, make up the overall X risk to the company. Enterprise Risk Management
  • 4. 4Enterprise Risk Management Risks Risk Statement Enterprise Risk Management– 1 2 3 4 5 6 7 8 9 10 11 12 14 15 13
  • 5. Enterprise Risk Management – Fall 2016 Assessment Low High Impact Likelihood 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 5Enterprise Risk Management 1 23 4 5 6 7 8 9 10 11 12 14 15 16 High Executive Risk Committee’s “Top Three” Risks Middle Tier of Top Risks Lower Tier of Top Risks Requires significant and sustained management attention Increasing Stable Decreasing Color of horizontal bar indicates risk trend rating 13 Risk Trend
  • 6. Top Risks Mapped to the ABC Inc. Risk Model Risks 6Enterprise Risk Management In addition to “rating” our top risks as to impact and likelihood, it is also helpful to map each risk to its primary risk “sources.” For our purposes we use the ABC Inc. Risk Model risks, a set of 34 business risks divided into four categories – Strategic, Financial, Operational and Compliance. While Diagram One (shown full size on the following page) may be a bit difficult to read, when the diagram is deconstructed by top risk, as in Diagram Two, it becomes a very useful tool to help management understand the true nature of the risk. For example, at ABC Inc., abc risk is primarily driven by our our portfolio, customer behavior, organizational structure and talent risks (see page 8). Diagram One Diagram Two
  • 7. 7 StrategicRisks Top Risks Mapped to the ABC Inc. Risk Model Risks Board Effectiveness Business Model & Portfolio Competitor Image & Branding Customer Behavior Organization Structure & Culture Sovereign/Political Technological Innovation Intellectual Property and License Financial Accounting & Reporting Credit Currency Liquidity Capital Availability Investment Valuation/Effectiveness Authority/Limit Budget, Planning & Monitoring Business Interruption Channel Effectiveness Communications Infrastructure Access Integrity Talent Product Pricing Supply Chain Health, Safety & Environment Ethical Behavior Information Security Internal Control Evaluation Regulatory Illegal Acts Third-party Fraud Shareholder Expectations & Financial Market (4) (11) (1) (15) (12) (5) (6) (8) (10) (3) (7) (9) (2) (13) (14) Top Risks FinancialRisks OperationalRisksComplianceRisks Risk Drivers Risk Drivers
  • 8. 8 StrategicRisks Top Risks Mapped to the ABC Inc. Risk Model Risks Board Effectiveness Business Model & Portfolio Competitor Image & Branding Customer Behavior Organization Structure & Culture Sovereign/Political Technological Innovation Intellectual Property and License Financial Accounting & Reporting Credit Currency Liquidity Capital Availability Investment Valuation/Effectiveness Authority/Limit Budget, Planning & Monitoring Business Interruption Channel Effectiveness Communications Infrastructure Access Integrity Talent Product Pricing Supply Chain Health, Safety & Environment Ethical Behavior Information Security Internal Control Evaluation Regulatory Illegal Acts Third-party Fraud Shareholder Expectations & Financial Market (4) FinancialRisks OperationalRisksComplianceRisks Top RisksRisk Drivers Risk Drivers
  • 9. Appendix 9 • Executive Risk Committee • Risk Rating Scale • Risk Trending Scale • Individual Risk Pages Enterprise Risk Management
  • 10. 10Enterprise Risk Management Executive Risk Committee Executive Title President & CEO Chief Operating Officer and President - Digital EVP & Chief Financial Officer EVP & President, Corporate Development, New Ventures & Investments EVP, Consumer Marketing EVP & Chief Revenue Officer CEO, ABC Inc. UK EVP, Chief Human Resources and Communications Officer EVP & General Counsel Chief Content Officer SVP, Global Technology Services SVP, Chief Auditor (non-voting)
  • 11. Enterprise Risk Management Likelihood Impact Financial Qualitative Examples Very Likely >X% Critical • Severe impact on the ABC Inc. brand resulting in major reductions in subscriptions/readership/ad buys. • Termination or reduction in executive leadership positions and/or 10-20% reduction in global workforce. • Unsustainable loss of multiple key talent. Likely X%-X% High • Significant impact on the ABC Inc. brand resulting in substantial reductions in subscriptions/readership/ad buys. • Termination or reduction in senior management positions and/or 5%-10% reduction in global workforce. • Loss of several key talent. Possible X%-X% Medium • Moderate impact on the ABC Inc. brand resulting in painful ,but manageable, reductions in subscriptions/readership/ad buys. • Termination or reduction in management positions and/ or up to 5% reduction in global workforce. • Loss of some key talent. Unlikely <X% Low • Little impact on ABC Inc. brand resulting in little to no incremental reductions in subscriptions/readership/ad buys. • Insignificant terminations or reduction in personnel. • Minimal loss of key talent. Enterprise Risk Management Risk Rating Scales 11 Impact rating may be based on financial, qualitative, or both
  • 12. Enterprise Risk Management Risk Trend Increasing The threat to the company, despite mitigating efforts, is expected to increase; the overall environment is becoming more risky. Stable to moderate increase The threat to the company, inclusive of mitigating efforts, is generally remaining the same, but it appears that the overall environment is becoming more risky. Stable The threat to the company, inclusive of mitigating efforts, is remaining the same. Stable to moderate decrease The threat to the company, inclusive of mitigating efforts, is generally remaining the same, but it appears that the overall environment may become less risky. Decreasing The threat to the company, inclusive of mitigating efforts, is decreasing through a combination of improved mitigating efforts and/or an improvement in the overall risk environment. Enterprise Risk Management Risk Trending Scale 12
  • 13. 13Enterprise Risk Management Enterprise Risk Management Risk Summary Risk Title Risk Statement Executive Sponsor Likelihood Likely Key Management Impact Critical Category Risk Trend Increasing Risk Synopsis • x. Mitigation Efforts • X. 1