Michel Rochette is a professional risk manager who helps organizations implement enterprise risk management (ERM) frameworks. He has over 20 years of experience in risk management. His goal is to ethically advise firms on best risk practices rather than sell ERM solutions. In addition to his advisory work, Michel is recognized as a thought leader in the ERM field through his presentations, articles, training and intellectual contributions.
Grant Thornton - Risk appetite: A market study UK 2012Grant Thornton
Grant Thornton's inaugural market study on risk appetite. The Risk Appetite study, the first of its kind, canvassed the views of 43 chief executive officers and managing directors from leading London insurers to define current maturity of practice, answering some of the common questions coming out of the market. Our intention is to conduct this study periodically; monitoring overall progress and trends across the market in relation to risk appetite.
A new emphasis on enterprise risk management from regulators has heightened awareness among bankers to get educated and adopt these best practices at their institution. In response to this increased focus, the RMA ERM Council developed the ERM framework and associated competencies, which became the foundation for a series of highly practical workbooks for implementing effective ERM.
Grant Thornton - Risk appetite: A market study UK 2012Grant Thornton
Grant Thornton's inaugural market study on risk appetite. The Risk Appetite study, the first of its kind, canvassed the views of 43 chief executive officers and managing directors from leading London insurers to define current maturity of practice, answering some of the common questions coming out of the market. Our intention is to conduct this study periodically; monitoring overall progress and trends across the market in relation to risk appetite.
A new emphasis on enterprise risk management from regulators has heightened awareness among bankers to get educated and adopt these best practices at their institution. In response to this increased focus, the RMA ERM Council developed the ERM framework and associated competencies, which became the foundation for a series of highly practical workbooks for implementing effective ERM.
Presented at the MENA-OECD Business Integrity Training, 22-25 April, Kuwait. Organised by the MENA-OECD Investment Programme in cooperation with the IMF-Middle East Center for Economics and Finance
Risk Appetite: A new Menu under Basel 3? Pieter Klaassen (UBS - Firm-wide Risk Control & Methodology) voor het Zanders Risicomanagement Seminar 1 november 2012
Risk Appetite: new challenges to manage an insurance companyPhilippe Foulquier
Based on a survey of European insurance companies, the results call into question some of the risk appetite indicators chosen by insurers. The study shows how risk appetite is applied to all decisions in a fully objective manner and it signals the need for a profound culture change with regard to risk-return analysis. It is on this point, which lies at the heart of the competition among players in the insurance sector – evaluating the performance of allocated capital by activity, measured against the risks incurred – that a number of structural shifts, innovations and changes will have to be made
How often have you wondered, “what else can go wrong and how are all the risks interconnected?” Developing a risk governance program, a stress testing and scenario analysis program, as well as a risk appetite statement, can help you build an effective, proactive risk management strategy and enhance the risk culture of your institution.
RMA's Risk Appetite Workbook is a practical guide to understanding and developing a risk appetite statement that is appropriate for your bank. Also available are workbooks on Scenario Analysis & Stress Testing for Community Banks, and Governance & Policies.
L'intérêt public: Étalon de la gouvernance étatiqueMichel Rochette
Un rapport dans le cadre de mes études doctorales sur la notion de l'intérêt public par rapport au rôle de l'État.
A report done as part of my doctoral studies on the notion of the "public interest" as used by the State. In French only.
Presented at the MENA-OECD Business Integrity Training, 22-25 April, Kuwait. Organised by the MENA-OECD Investment Programme in cooperation with the IMF-Middle East Center for Economics and Finance
Risk Appetite: A new Menu under Basel 3? Pieter Klaassen (UBS - Firm-wide Risk Control & Methodology) voor het Zanders Risicomanagement Seminar 1 november 2012
Risk Appetite: new challenges to manage an insurance companyPhilippe Foulquier
Based on a survey of European insurance companies, the results call into question some of the risk appetite indicators chosen by insurers. The study shows how risk appetite is applied to all decisions in a fully objective manner and it signals the need for a profound culture change with regard to risk-return analysis. It is on this point, which lies at the heart of the competition among players in the insurance sector – evaluating the performance of allocated capital by activity, measured against the risks incurred – that a number of structural shifts, innovations and changes will have to be made
How often have you wondered, “what else can go wrong and how are all the risks interconnected?” Developing a risk governance program, a stress testing and scenario analysis program, as well as a risk appetite statement, can help you build an effective, proactive risk management strategy and enhance the risk culture of your institution.
RMA's Risk Appetite Workbook is a practical guide to understanding and developing a risk appetite statement that is appropriate for your bank. Also available are workbooks on Scenario Analysis & Stress Testing for Community Banks, and Governance & Policies.
L'intérêt public: Étalon de la gouvernance étatiqueMichel Rochette
Un rapport dans le cadre de mes études doctorales sur la notion de l'intérêt public par rapport au rôle de l'État.
A report done as part of my doctoral studies on the notion of the "public interest" as used by the State. In French only.
Proposition d'une liste électorale informatiséeMichel Rochette
Une analyse que j'ai produite en 1995 à la suite d'un concours lancé par l'Institut Fraser. J'ai proposé et calculé les avantages pour l'État d'établir une liste électorale informatisée. C'est maintenant le cas au Canada.
An analysis that I produced in 1995 following a call for paper by the Fraser Institute. I proposed and calculate the advantages for a governement to establish a computerized electoral list. It is now the situation in Canada. Other countries should envision the same.
Proposition de la création d'un fond de capital de risque pour l'industrie to...Michel Rochette
Une proposition de recherche pour la création d'un fond de capital de risque pour l'industrie touristique au Québec. Ce document date de quelques années mais les idées seraient toujours pertinentes.
A research proposal to stude the creation of a capital risk fund for the Québec tourism industry. The document dates from a few years back but some of the ideas are still relevant.
Unemployment Insurance in Canada: proposals for reformMichel Rochette
A older public Policy research report on reforms to the Canadian Unemployment program as it used to be called/
Un rapport de recherche concernant un projet de réforme au programme d'assurance-chômage au Canada.
Assurance-chômage au Canada: propositions de réformeMichel Rochette
Un rapport de recherche concernant des propositions de réforme au programme d'assurance-chômage au Canada. Le rapport date de quelques années mais les concepts sont toujours d'actualité.
Importance of financial management
Overview of Financial Management
Time Value Of Money
Cost of capital
International Financial Management
Return and Risk
Valuation of financial instruments
Enterprise risk management is an underutilized management practice that allows community-based financial institutions to become more efficient, smarter, and better able to compete in an increasingly complex environment.
WolfPAC Solutions Group Director Michael Cohn creates a strong case on why community-based financial institutions should implement an enterprise risk management program to reduce costs and successfully achieve business goals in an increasingly competitive and regulated environment.
ERM Implementation ERM is essential for organizations.docxelbanglis
ERM Implementation
ERM is essential for organizations in managing risks and improve on opportunities related to the achievement of organizational objectives. Statoil and United Grain Growers have established an enterprise risks management that meets their company goals based on the challenges each of them is facing.
The primary difference between ERM in Statoil and United Grain Growers is that ERM will affect management at the latter. Additionally, ERM at United Grain Growers seeks to retrieve the company from financial constraints while at Statoil, ERM seeks to improve organizational performance. However, ERM at the two companies share some similarities. For instance, ERM at United Grain Growers seeks to identify and access principle risks. The same applies to Statoil which seeks to identify any potential risks during the exercise. Besides, the two companies have a strategic risk plan. A strategic plan is essential as it outlines the role of a manager, CEO and everyone involved in the steps of an ERM (Robert and Liebenberg, 2011). United Grain growers has a strategic plan to improve financial dividends while Statoil has a risk map and committee with outlined roles and responsibilities.
The Statoil ERM seems workable and productive meaning I can implement it is it were up to me. On the contrary, I will not implement the United Grain Growers ERM. In my opinion, the ERM lacks the potential to solve financial constraints that the company is experiencing. However, some parts of it are productive, but a merger comes in with other risks for the struggling company. For instance, a merger will lead to employee layoff which might put the company at a risk of losing some important skills (Chui, 2011). Additionally, the company assets might be miscalculated during financial evaluation leading to more losses.
Generally, the ERM at Statoil might be successful in future because it is based on company goals and values. On the contrary, UGG ERM might not succeed because there are many risks associated with its strategy for implementation.
References
Chui, B.S. 2011. A Risk Management Model for Merger and Acquisition.
Robert, E.H. and Liebenberg, A.P. (2011). The Value of Enterprise Risk Management. The
Journal of Risk and Insurance, 78(4).pp. 795-822.
https://doi.org/10.1111/j.15396975.2011.01413.x
According to Brustbauer, 2016 Enterprise risk management help the company prepare for the uncertainties and disasters that may occur all along. Every business must identify the threats likely to face the business and come up with a contingency plan. Different companies faces different threats and uncertainties and therefore while coming up with the risk management plan one must consider the uniqueness of the enterprise and the likely threats to occur. These differences make the companies and business have different hierarchy of risks that are likely to occur. This paper is going to compare and contrast the enterprise risk management of the united g ...
Business and Risk go hand in hand, the professionals like chartered accountants with expertise in finance, management and audit are well suited for the role of forecasting, evaluating, and mitigating prospective risk involve in any organization’s activity and seize opportunities to take the growth of business on next level. This article brings you in-depth details of the role of a chartered accountant in Enterprise Risk Management.
STRATEGIC PLANNINGManaging Risks A NewFrameworkby Rob.docxsusanschei
STRATEGIC PLANNING
Managing Risks: A New
Framework
by Robert S. Kaplan and Anette Mikes
FROM THE JUNE 2012 ISSUE
W
Editors’ Note: Since this issue of HBR went to press, JP Morgan, whose risk management practices are
highlighted in this article, revealed significant trading losses at one of its units. The authors provide
their commentary on this turn of events in their contribution to HBR’s Insight Center on Managing
Risky Behavior.
hen Tony Hayward became CEO of BP, in 2007, he vowed to make safety his top
priority. Among the new rules he instituted were the requirements that all
employees use lids on coffee cups while walking and refrain from texting while
driving. Three years later, on Hayward’s watch, the Deepwater Horizon oil rig exploded in the Gulf
of Mexico, causing one of the worst man-made disasters in history. A U.S. investigation commission
attributed the disaster to management failures that crippled “the ability of individuals involved to
identify the risks they faced and to properly evaluate, communicate, and address them.” Hayward’s
story reflects a common problem. Despite all the rhetoric and money invested in it, risk
management is too often treated as a compliance issue that can be solved by drawing up lots of rules
and making sure that all employees follow them. Many such rules, of course, are sensible and do
reduce some risks that could severely damage a company. But rules-based risk management will not
diminish either the likelihood or the impact of a disaster such as Deepwater Horizon, just as it did
not prevent the failure of many financial institutions during the 2007–2008 credit crisis.
Identifying and Managing
Preventable Risks
In this article, we present a new categorization of risk that allows executives to tell which risks can
be managed through a rules-based model and which require alternative approaches. We examine
the individual and organizational challenges inherent in generating open, constructive discussions
about managing the risks related to strategic choices and argue that companies need to anchor these
discussions in their strategy formulation and implementation processes. We conclude by looking at
how organizations can identify and prepare for nonpreventable risks that arise externally to their
strategy and operations.
Managing Risk: Rules or Dialogue?
The first step in creating an effective risk-management system is to understand the qualitative
distinctions among the types of risks that organizations face. Our field research shows that risks fall
into one of three categories. Risk events from any category can be fatal to a company’s strategy and
even to its survival.
Category I: Preventable risks.
These are internal risks, arising from within the organization, that are controllable and ought to be
eliminated or avoided. Examples are the risks from employees’ and managers’ unauthorized, illegal,
unethical, incorrect, or inappropriate actions and the risks from br.
La gestion actif-passif (ALM), également connue sous le nom de gestion des actifs et des passifs, est une pratique essentielle dans le secteur des compagnies d'assurance. Elle vise à équilibrer les actifs et les passifs d'une compagnie d'assurance afin de garantir sa solvabilité et sa rentabilité à long terme. Cette stratégie consiste à gérer de manière proactive les actifs et les passifs de l'entreprise pour minimiser les risques liés aux écarts de durée, de taux d'intérêt et d'autres facteurs qui pourraient affecter sa situation financière.
Dans le contexte de l'assurance, les passifs représentent les engagements futurs de l'entreprise envers ses assurés, tels que les paiements de prestations, les sinistres et les obligations contractuelles. Les actifs, quant à eux, sont les investissements détenus par la compagnie d'assurance pour répondre à ces engagements. L'objectif principal de l'ALM est d'assurer que les actifs de la compagnie d'assurance sont suffisants pour couvrir ses passifs à tout moment, tout en optimisant le rendement de ces actifs.
La gestion actif-passif implique une analyse approfondie des caractéristiques des passifs de l'entreprise, telles que leur montant, leur échéance et leur sensibilité aux fluctuations des taux d'intérêt, ainsi que des caractéristiques des actifs détenus, comme leur liquidité, leur rendement et leur risque. Sur cette base, des stratégies d'investissement sont élaborées pour aligner au mieux les actifs avec les passifs, tout en tenant compte des objectifs de rendement et de risque de l'entreprise.
Les compagnies d'assurance utilisent une gamme d'outils et de techniques pour mettre en œuvre leur stratégie ALM, notamment l'allocation d'actifs, le rééquilibrage de portefeuille, la gestion des risques et l'utilisation de produits dérivés financiers pour couvrir les risques. Elles peuvent également recourir à des modèles mathématiques sophistiqués pour évaluer et gérer les risques financiers.
En résumé, la gestion actif-passif est cruciale pour assurer la solidité financière et la viabilité à long terme des compagnies d'assurance en équilibrant leurs actifs et leurs passifs de manière à minimiser les risques et à maximiser les rendements. C'est une discipline complexe qui nécessite une expertise financière approfondie et une surveillance continue des conditions du marché et des engagements de l'entreprise.
The requirement for presentation(need in 4hrs)slide1ERM at M.docxkathleen23456789
The requirement for presentation:(need in 4hrs)
slide1:
ERM at Mars and UC
slide2:ERM in industry and academia
slide3:Measuring and Selecting an ERM Framework
slide 4:Special Rick Management Topic
slide 5 :conclusion
below is the content for doing a presentation
1. ERM at Mars and UC
Two different organizations can approach similar to the ERM due to some common benefit or some common purpose suppose we have following two organization the ERM at Mars incorporated and ERM in practice at the University of California Health The system both the approaches are used to spread and include the process in business units and other units. The developments in these growths of this program caused working with the professionals to address the business units.
Ways the two organization’s approaches to ERM differ
Two different organizations can approach in a different way to ERM because it has different purposes and different advantages which vary from field to field (WARNER, LARRY, 2015). Suppose we have following two different organizations that approach differently the ERM at Mars can be migrated to the non-family management i.e., it can apply to other areas/platforms different from professional organizations, while ERM at UC focuses on the enterprise risk analysis, audits, monitoring and report generation. ERM at Mars uses simple technology in framework building like word, excel and some tools. Whereas ERM at UC focuses on complex technologies for the building of the framework.
One aspect of each ERM implementation from which the other organization would benefit
For any organization implementing Enterprise Risk Management is a key, initially, an organization has to know about the fundamentals i.e. scope and tools that accommodate the ERM implementation plan. To implement ERM getting essentials right up to an organization explicit ERM system that unmistakably and quantifiably characterizes what ERM will mean for the organization and utilizing that structure to build up an ERM execution plan that is explicitly for accomplishment in the organization.
Enterprise Risk Management (ERM) mainly involves six fundamentals.
Identify
Analyze
Control
Transfer
Reduce
Assess
Most Organizations have faith in big business change administration like ERM. In many cases, many have been baffled by execution issues at this point, caused ERM to miss the mark regarding its potential. Before starting ERM they have to do solid back end work to implement.
What advantages can an organization acknowledge through ERM
Organizations that comprehend their dangers have a more noteworthy capacity to anticipate or respond to occasions that can affect objectives and targets. Eventually, this can convert into less unpredictability and an aggressive edge. A decent handle of hazard can likewise open up an organization's viewpoint on circumstances it might need to seek after.
ERM empowers the board and the board to have an increasingly steady perspective of a way .
One of the fastest growing concerns on insurers’ enterprise risk agenda is model risk
management. From being a phrase that primarily actuaries and other modelers used, “model risk” has become a major focus of regulators and the subject of intense activity and debate at insurers. How model risk management has evolved from ad hoc efforts to its currentproactive stage is an interesting story. But more interesting still is
what we believe could be its next stage – generating measurable business value.
Operational and reputation risk: Essential components of ERM-MandarinMichel Rochette
An article on the Relationship of operational risk and reputational risk in madarin/
Un article sur la relation entre les risques opérationnels et réputationel en mandarin
A presentation on the proposed ERM risk evaluation standard by the US Actuarial Standards Board.
Présentation de la norme ERM du Actuarial Standards Board des USA
DIFFERENCES BETWEEN ERM PRACTICES BETWEEN THE FINANCIAL AND CORPORATE SECTORS
DIFFÉRENCES DES PRATIQUES ERM ENTRE LES SECTEURS FINANCIERS ET CORPORATIFS
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
According to TechSci Research report, “India Orthopedic Devices Market -Industry Size, Share, Trends, Competition Forecast & Opportunities, 2030”, the India Orthopedic Devices Market stood at USD 1,280.54 Million in 2024 and is anticipated to grow with a CAGR of 7.84% in the forecast period, 2026-2030F. The India Orthopedic Devices Market is being driven by several factors. The most prominent ones include an increase in the elderly population, who are more prone to orthopedic conditions such as osteoporosis and arthritis. Moreover, the rise in sports injuries and road accidents are also contributing to the demand for orthopedic devices. Advances in technology and the introduction of innovative implants and prosthetics have further propelled the market growth. Additionally, government initiatives aimed at improving healthcare infrastructure and the increasing prevalence of lifestyle diseases have led to an upward trend in orthopedic surgeries, thereby fueling the market demand for these devices.
Taurus Zodiac Sign_ Personality Traits and Sign Dates.pptxmy Pandit
Explore the world of the Taurus zodiac sign. Learn about their stability, determination, and appreciation for beauty. Discover how Taureans' grounded nature and hardworking mindset define their unique personality.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
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[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
1. From risk management to ERM
Received (in revised form): 27th February, 2009
Michel Rochette
is a professional enterprise risk manager who assists organisations to implement the main components of an
ERM framework, including risk and economic capital processes, in order to create long-term value for their
enterprise. Michel has been working in the risk management field since 1992 and has extensive hands-on as
well as strategic risk experience. Michel’s professional goal is not to sell ERM solutions to companies but to
advise firms and make ethical recommendations on the best risk management practices for them. In addition
to his advisory and corporate roles, Michel is also recognised as a thought leader in the ERM field,
contributing innovative and pertinent presentations, articles, training and intellectual capital to the industry.
Enterprise Risk Advisory, 3838 Drolet, Montreal, Quebec H2W 2L2, Canada
Tel: þ1 224 735 6466; E-mail: michel.rochette@avivausa.com; michel.rochette@enterprise-risk-advisory.com
Abstract At one point in time, there was self-insurance. Then came risk
management. Now comes the era of enterprise risk management (ERM).
Traditional risk management will always be necessary, but ERM will
complement existing risk activities by extending the field to cover all core risks
as well as emerging and strategic opportunities, because without taking risks,
organisations gain no value. In addition, ERM will be taken seriously by
financial participants and stakeholders if an organisation has a risk champion in
the guise of a CRO, an emerging C-level position with its own set of
requirements and proper training. This paper will present the main elements of
an ERM framework and characteristics of different types of ERM. It will
elaborate on the main roles and responsibilities of a CRO along with potential
designations that would contribute to making the position fully valued and
recognised by society.
Keywords: ERM, CRO, risk management, risk designation, risk framework, risk
culture, governance, risk intelligence, risk capital
INTRODUCTION
Risk is an essential component of living.
In fact, every creature on this planet must
continuously evaluate the environment in
which it lives, process that information,
and evaluate how to adapt to changing
conditions. In this way, life progresses.
For example, when people moved from
small country villages into larger cities
during the industrial revolution, they had
to adapt to a new risk environment,
surrendering the capacity to make their
own food. However, new opportunities
emerged, and people were able to
improve their standard of living due to
the ensuing sophistication of exchanges.
As most people are risk-averse, they
tend to focus on the negative side of risk,
and forgo the opportunities represented
by a well-considered risk management
programme. In fact, there is nothing
inherently wrong if an organisation
incurs losses, as long as they are properly
anticipated, managed, and the profits
generated by the activities more than
compensate for the losses. There is
always a trade-off between risk and
return.
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2. Unfortunately, due to many external
forces (mainly regulatory), most risk
professionals have replicated and
emphasised the negative aspect of
risk-taking activities. For example, the
traditional value-at-risk (VAR) measure
used as the risk metric for trading
portfolios is usually taken as a one-sided
estimate. The credit models used to
forecast credit losses only focus on the
potential portfolio losses. Likewise, the
methods used for operational risk again
focus on the estimation of losses. In
addition, these risk estimates are made in
silos and never seem to embed and
measure the potential for growth as
afforded by involvement in core risky
activities.
Thus, if the risk profession wants to
continue to show its value and relevance
to organisations and society at large, it
should evolve and stop considering risk
solely as negative, and embed the
opportunities that come with risk-taking
activities as well, resulting in a more
balanced view. In fact, companies are
looking to their risk managers’ expertise
and advice about emerging threats that
are changing continuously, helping them
turn those threats into risk-adjusted
opportunities. By doing so, risk
managers have the potential to become
enterprise risk managers and accompany
their firm into the risky 21st century.
This paper will present the major tenets
of this new field.
DOES RISK MANAGEMENT
IN GENERAL ADD VALUE?
Before embarking on a definition of
enterprise risk management (ERM),
the paper will consider how risk
management in general creates
and sustains value.
When markets are efficient, Miller and
Modigliani’s financial proposition and
modern financial theory suggest that
investors can diversify away a firm’s risk
exposures — the volatility in the firm’s
value — by themselves very efficiently.1
They do not need the organisation to set
up a risk management framework to do
so. In fact, setting up a risk management
framework would destroy corporate value
and reduce the value of a well-diversified
investor’s portfolio. Thus, equity investors
should only worry about systematic risk
and reflect this fact in their required rates
of return as represented by the beta of
the firm in the capital asset pricing
model (CAPM).
However, this traditional proposition is
based on a series of assumptions that have
been shown not to hold in practice,
particularly in a situation of financial
distress. At this point, risk management
shows its full relevance.
The assumption of no
bankruptcy or near bankruptcy
costs associated with financial
distress
Contrary to this assumption, in a
situation of financial distress, firms may
have difficulty raising additional capital
to continue their strategic expansion,
resulting in under-investment and an
ensuing reduction in their overall
financial value. This is particularly
relevant in times of severe liquidity
constraints that usually accompany
periods of financial distress.
Thus, if a risk management framework
can allow a firm to continue to raise
capital, its long-term value will be
increased. Viewed from another
perspective, risk management acts
as a form of overall corporate
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3. insurance — contingent capital — or as
a long-term out-the-money put option
that serves to eliminate or reduce the
downside aspects of risk exposures while
preserving the potential of upside
returns. This is similar to a traditional
insurance policy where one substitutes
a small known loss in advance — a
premium — to protect oneself against
an unknown potentially devastating
situation. This type of protection takes
on a lot of value in times of stress, and
reassures investors about the firm’s value
prospects.
In addition, bankruptcy costs represent
a particular blow to the owners of
closely-held companies, who cannot
really diversify away the inherent company
risks. The same situation applies to
managers, employees, customers, suppliers
and regulators whose situation, in many
cases, is tightly aligned with the wellbeing
of their company. In a firm without risk
management, employees will demand
higher wages and reduce their company
loyalty (after all, who would want to work
hard when layoffs are around the corner?),
suppliers will be more hesitant to enter
into long-term contracts and will be more
demanding with their trade credits, and
customers will be hesitant to buy the
company’s products because of its
perceived incapacity to service them and
fulfil future warranties (think of GM,
Lehman Brothers and Merrill Lynch),
thus decreasing the firm’s value and
precipitating its downfall. Risk
management can alleviate those situations.
The assumption of no taxes
or transaction costs
Contrary to the Miller-Modigliani
proposition,1
risk management can
enhance the value of the firm by
smoothing earnings and the resulting
firm’s tax liability through the interaction
of lower marginal tax rates and tax
deferrals. In addition, having a risk
framework in place allows a firm to
increase its debt capacity or reduce its
required capital and thus benefit from the
tax shield associated with the tax
deductibility of the interest payments
on the debt — this can be of substantial
value to an organisation.
No agency conflicts within
a firm
In an ideal world, all stakeholders’
interests would be aligned to maximise
the value of the firm. However, this is
not the case in reality, particularly when
stock options are granted to management
and when their compensation is focused
more on short-term gains than on
long-term profitability. For example,
managers may want to leave a firm
unhedged to certain external risks with
the hope of profiting through a sudden
and temporary increase in the value of its
corporate shares. In other cases, they may
decide to pass on long-term positive net
present value (NPV) projects because of
their potential negative short-term
impact. Thus, establishing a risk
management framework with the proper
limits and compensation incentives can
alleviate these inherent agency conflicts
by removing the selective bias created by
misaligned interests within the firm.
Thus, if risk management can reduce a
firm’s cost of capital due to diminished
potential and real bankruptcy, taxes and
misaligned agency costs, it becomes a
value proposition that not only smoothes
reported earnings, but also enhances
strategic investment decisions and value,
particularly if conducted from an
enterprise perspective.
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4. ENTERPRISE RISK
MANAGEMENT: A NEW
PARADIGM
Beyond implementing traditional risk
management frameworks, one promising
avenue for risk managers to expand their
role in society and in the companies
in which they work is the field of
enterprise risk management. Appendix A
compares the main characteristics of
different versions of risk management
and enterprise risk management
frameworks.
Traditionally, when one thinks of risk
management, one thinks about the
insurance specialist, broker or the
auditor, who worries about the negative
consequences of risk exposures. Risk is
viewed in a negative way, something to
avoid or to have its consequences
minimised. In fact, this approach can be
found in many traditional risk
management standards, such as ISO
and COSO I with their emphasis on
controls. Other approaches are focused
on risk management but solely from a
compliance perspective while others
focus only on overall corporate
governance issues.
In recent years, risk management has
been evolving into ERM. Unlike risk
management per se, the overall goal of
ERM is not simply to manage risks —
particularly the expected and unexpected
negative consequences that generate
financial distress — but also to view risk
positively, something to seek in order to
create value.
However, within this broad and
evolving field of ERM, there are many
variations. Some aim to extend the
traditional risk management approach to
cover a broader set of risks and
consolidate all similar exposures
throughout a firm. Certain industry
standards that support this approach
could be characterised as enterprise-wide
risk management. For example, standards
such as COSO ERM II or AS/NZS
4360 aim to give management an
assurance that, once their strategic goals
are set, there will be a high probability
that the firm will reach them. Enterprise
risk managers are not directly involved in
strategic choices but provide re-assurance.
Another version is a value-based ERM
framework. A value-based ERM does
not seek to replace the traditional risk
management practices, which will always
be necessary, but aims to integrate risk
into the broader strategic decisions of the
firm, identifying, measuring and
managing not only the direct financial
consequences of risk and opportunities
but also indirect consequences like
potential non-financial impact.
VALUE-BASED ENTERPRISE
RISK MANAGEMENT:
DEFINITION
Many definitions have been proposed in
the last few years (see Appendix B). A
value-based ERM (hereafter simply
referred to as ERM) could be defined
as the strategic enterprise process of
identifying, assessing and responding to
the collective risks and opportunities that
may affect the enterprise’s ability to attain
its strategic goals, optimise its
stakeholders’ value and improve its overall
stewardship and management. Following
this approach are two recent standards,
namely ISO 31000 and its European
equivalent.
In addition, ERM is relevant to any
organisation. An enterprise is more than
a firm or a company, where risk
management has been mostly practised
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# Henry Stewart Publications 1752–8887 (2009) Vol. 2, 4 394–408 Journal of Risk Management in Financial Institutions 397
5. up to now. In fact, an enterprise can be
described as any human organisation,
whether it is for profit or not and
whether it is private or public. Risk in
this context not only includes the
negative impact of risk but also the
opportunities that any organisation should
undertake in order to survive, progress
and prosper. Additionally, management
refers to the strategic decision-making
processes that organisations undertake in
order to manage opportunities and risks.
Thus, ERM becomes an essential
component of management, while a
traditional risk management function —
particularly a silo-based one — would be
the purview of insurer brokers or some
auditors, for example.
The following section will describe in
more detail the main components of an
ERM framework that distinguish it from
other risk frameworks.
THE MAIN COMPONENTS
OF ERM
The main goal of an ERM framework
is to complement existing strategic
management processes, allowing an
enterprise to take a global, consolidated
and forward-looking view of its risks and
opportunities. An ERM framework
should cover an enterprise’s main
projects, processes, products and services
now and in the future, taking into
account the ever-changing risk
environment in which the entity operates
(both external and internal), while
anticipating opportunities.
In order to function properly and assist
an organisation to attain its strategic
objectives, an ERM framework must
have a few essential components. The
first two are usually found in most
organisations claiming to have an ERM
framework. However, to really benefit
strategically from implementing an ERM
approach, a few additional elements are
necessary as outlined below.
First, an ERM must exist within the
overall governance structure of a firm,
with the proper physical, IT and human
resources with well-defined roles and
responsibilities, an ERM policy
and standards, proper accountability and
reporting relationships, and performance
indicators within an overall dashboard,
supported by an audit and compliance
function. Secondly, the traditional risk
management processes of risk ownership,
reporting and treatment must be in place
to execute and implement the
management of the risks per se,
particularly in the business units or in
some centralised functions.
However, to be a value-based ERM
framework, additional components are
essential. First, there should be a risk
champion, usually in the guise of a chief
risk officer (CRO), who would be a
C-level executive responsible for assisting
the organisation with the risk aspects of
its strategic choices as well as being
responsible for implementing and
monitoring the ERM process itself.
Certain organisations appoint an overall
risk manager who reports to the CFO,
for instance. This is not the ideal
situation as the CFO’s main goal is to
maximise return and then ‘forget’ about
some of the risks in order to attain those
goals. Thus, a clear separation of duties
between the CFO and the CRO gives
additional assurance that the risk-adjusted
opportunities will be analysed and
undertaken from a strategic perspective.
In fact, another essential component of
an ERM framework is that the risk
identification and analysis should be
done from a strategic perspective, from
a top-down, macro and forward-looking
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6. view. The ERM analysis draws upon
other strategic analyses such as the
traditional strengths, weaknesses,
opportunities and threats (SWOT)
analysis and other strategic work
performed by organisations. This analysis
should take a broad, portfolio view,
understand and model the links and
correlations that may exist between
different parts of the organisation and
between different risks. In contrast, an
ERM-wide risk framework would
simply consolidate risk exposures.
In addition, an ERM framework
allows an enterprise to focus its goals on
the core opportunities and risks where
it has a comparative advantage and to
eliminate the noise created by
non-essential risks. For example, for an
insurer, a core risk and opportunity
would be represented by demographic
risks; for a banker, meanwhile, the core
risk would be credit risk. Done from the
strategic perspective that only an ERM
value-based approach allows, a core risk
then becomes the de facto key risk of an
entity. Such a conclusion would not be
reached by a traditional risk analysis. In
fact, in a simple and traditional
bottom-up risk analysis disconnected
from the firm’s strategic goals, as is often
completed by less sophisticated
consultants like insurer brokers, a firm
could be reducing a core risk because it
is perceived to have become a key risk
when viewed from that perspective.
However, doing so would be an
inappropriate decision in the context of an
ERM framework focused on value creation
because it does not take into account a
firm’s strategic goals, financial resources and
strengths at managing and generating value
by assuming that core risk, which is the
reason why people want to transfer the risk
to that entity in the first place.
It is also essential for the chosen ERM
metric to be based on a definition of
value. Value should be determined from
many perspectives, not just financial
ones, and should be done from the
perspectives of many stakeholders, not
only shareholders. Indeed, private
companies are usually only concerned
about the financial consequences of risk,
although integrating non-financial aspects
can also enhance the understanding of
the financial consequences of issues
like corporate social responsibility,
sustainability and their impact on
reputation. For a governmental entity,
impact might include the measurement
of health and security risks and the
wellbeing of its population. This approach
is different from other risk frameworks such
as an enterprise-wide risk framework that
emphasises capital as the main metric to
make decisions. Capital represents the
financial resources from which a firm
finances its growth and absorbs its expected
and unexpected risk losses as determined
from the ERM analysis.
In addition, in an ERM framework,
value, risk and capital become integrated
into a common framework dedicated to
supporting the strategic priorities of the
firm instead of being managed separately
as is often the case in a silo-based risk
framework. In the end, performance
evaluation measures like risk-adjusted
return on capital (RAROC) become the
final step that links realised value created
by the new opportunities and the cost of
capital used to sustain those opportunities
and their underlying risks. The capital
structure of the firm — debt leverage
versus equity — and risk management
decisions thus become interchangeable so
that capital affects the capacity of a firm
to take on more core risks while more
risk affects the capital structure of the
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# Henry Stewart Publications 1752–8887 (2009) Vol. 2, 4 394–408 Journal of Risk Management in Financial Institutions 399
7. organisation and vice versa given its
strategic goals.
Another aspect of ERM that
distinguishes it from other risk frameworks
is the determination of an explicit risk
appetite statement — based on the same
value-based metric — that will guide the
organisation and the business units in their
day-to-day activities through the
monitoring of a limit-based risk
framework. Thus, an ERM framework
generates the limits instead of simply
aggregating them from a bottom-up
approach as would be the case in an
ERM-wide or a traditional risk framework.
Finally, in a recent survey by the
Economist Intelligence Unit,2
62 per
cent of respondents mentioned that an
ERM programme would be an essential
component in protecting the reputation
of their firm, which is another way of
linking ERM with the value of the firm.
The main components of an ERM
value-based framework can be
summarised as follows:
† ERM governance:
— board involvement and an ERM
committee;
— dedicated CRO;
— ERM policy with well-defined roles
and responsibilities;
— independence of views sought
throughout the framework;
— complementary risk, audit and
compliance functions.
† ERM risk appetite:
— forward-looking financial and
non-financial statement about
desired risk profile translated into
risk limits for all core risks.
† ERM core risks and opportunities:
— identify and assess core risks and
opportunities for which the firm has
a comparative advantage;
— identify, assess and prioritise in line
with risk appetite and strategic
objectives — risks and opportunities
mapping;
— analysis not done in silos but takes
into account correlation, chain of
events’ potential impact, done from
a top-down approach with
bottom-up feedback;
— set up processes to identify and
assess emerging risks and
opportunities — focus on the
known unknowns as well as the
unknown unknowns;
— integrate with SWOT analysis and
other strategic initiatives.
† ERM risk assessment:
— determine and implement an ERM
value metric — value should
evaluate financial and non-financial
potential impact, for example:
W financial value metric —
earnings at risk, cash flow at
risk, embedded value;
W non-financial value metric —
sustainability index.
† ERM risk intelligence:
— internal/external communication —
inform stakeholders about risk
appetite and risk/opportunities
profile from a risk-adjusted value
perspective;
— implementation in day-to-day
decision making with dashboards
and minimum and maximum limits,
not just quarterly reports to a risk
committee;
— establish continuous and
forward-looking processes to
identify risks and opportunities;
— perform an overall risk and
opportunities evaluation, not simply
a valuation of the risks.
† Traditional risk management processes (avoid,
retain, transfer):
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8. — traditional risk treatment approaches
like control, hedging and insurance
should be evaluated in the context
of a risk-return trade-off taking into
account the risk appetite;
— integrate capital and risk
management as part of the risk
response including contingent
capital like insurance;
— establish and monitor risk limits
based on a top-down view and risk
appetite determination;
— establish incentives and performance
measures based on the value
generated by opportunities and
losses anticipated;
— feedback loop — validation and
back testing of the ERM processes
must be implemented.
THE CHIEF RISK OFFICER:
CHAMPION OF ERM
To guide an organisation towards
deploying an enterprise risk management
framework, more and more enterprises
are creating the position of chief risk
officer (CRO). The term ‘CRO’ was
first quoted by James Lam, a well-known
figure in the ERM field.3
Like other
C-level executives, this person has the
responsibility to put in place a strategic
enterprise risk management framework
as outlined previously, and collaborate
with other C-level executives during its
implementation and operation.
As mentioned previously, instead of
nominating a CRO, some organisations
prefer to assign responsibility for ERM
to another executive, namely the CFO.
However, although a CFO can certainly
take on these additional responsibilities,
doing so entails an inherent conflict. A
CFO’s main responsibility is the financial
wellbeing of a firm, which is certainly
affected by the risks and opportunities
facing the organisation. If risk evaluation
is relegated to the background as the
CFO’s responsibilities are not primarily
focused on this area of practice, there is
a chance that ERM will not be part of
the strategic decisions of the firm. In
addition, if the CFO’s remuneration is
not risk-adjusted, risk evaluation might
not be completed as thoroughly.
Thus, when a firm decides to appoint
an independent CRO, it sends a clear
signal internally and externally about its
level of seriousness and commitment to
carry out ERM. At this point, ERM can
be integrated into the day-to-day
business processes and the CRO becomes
an essential partner in the growth
strategies of the enterprise. Appendix C
provides an overview of the main
responsibilities of a CRO in an ERM
context.
In addition, a CRO should develop a
strategic understanding of an enterprise’s
core activities, especially a horizontal
understanding of how a firm’s processes
fit together to produce the enterprise’s
products and services, ie its value chain.
This is in sharp contrast to most risk
managers’ traditional silo-based view of
their enterprise. They tend to be
masterful at modelling and managing
risks under their control with little
appreciation of the relationship,
correlation and impact of risks
throughout the enterprise’s main business
activities and processes. Further, as has
been demonstrated over and over, most
major events that affect firms never
happen in isolation but result from a
chain of events, a domino effect, which
can either wipe out the firm or make it
very successful. Thus, the new enterprise
risk manager must understand the
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# Henry Stewart Publications 1752–8887 (2009) Vol. 2, 4 394–408 Journal of Risk Management in Financial Institutions 401
9. potential company killers in addition to
helping the organisation capitalise on
new risky opportunities, thus enhancing
its value.
Finally, as the enterprise risk manager
is not the owner of the enterprise’s risks
but rather an ERM facilitator, they must
rely on and work with risk specialists
throughout the firm, using them as their
eyes and ears. Thus, interpersonal,
leadership, negotiation and team-building
skills are essential. In addition, excellent
written and oral communication and
behavioural skills adaptable to many of
the different business groups within an
enterprise are necessary qualities to
become a successful CRO.
ERM DESIGNATIONS
So, how does one become a CRO or an
enterprise risk manager? Although many
gain the position through on-the-job
training coupled with personal
development experiences, existing risk
organisations are trying to define the
necessary professional training and grant
designations to be recognised as an ERM
expert and professional.
In spite of many recent proposals and
efforts by competing risk organisations,
no professional group’s risk designation
has yet embodied the major elements of
what constitutes the essence and practice
of ERM. In fact, they usually start from
their existing base and try to capitalise on
the emerging ERM field by adding some
training that they claim will turn their
members into ERM professionals. In
certain cases, however, they focus too
much on the quantification aspects,
while in other cases they are too
qualitative and replicate the traditional
risk frameworks. None of them seem to
be able to develop the necessary
combination of quantitative, strategic and
personal skills that ERM professionals
must possess.
The overall goal of the enterprise risk
professional designation would be to
train a candidate to acquire both
quantitative and qualitative skills but also
ground that training in a business
education context. The candidate would
develop a strategic risk mindset geared
towards the future and be capable of
seeing the big picture, both from a risk
and opportunistic perspective. In
addition, a thorough knowledge of the
traditional risk fields and an expertise in
the dynamic nature of an industry would
be necessary in order to understand and
challenge existing risk techniques,
particularly in financial institutions.
However, before such a potential
designation takes shape, candidates for
the ERM position can acquire some of
the appropriate education from the
existing risk organisations, the credentials
of which are summarised in Appendix
D. This list was compiled from those
organisations that have demonstrated an
interest in ERM over the last few years,
both in terms of their basic training and
the topics covered in their publications
and during their courses and events. For
some of them, membership is based on
examination, while for others, it is based
on experience along with some basic
education.
Finally, many other organisations not
listed in Appendix D offer risk
designations but they are usually more
focused on a particular risk or sector, and
do not naturally lend themselves to the
ERM-type designation. For example,
risk designations such as CISA (IT/
security risk), CFE (fraud risk), CPCU
(casualty insurance), FLMI (life
insurance), PMP (project risk) and
ORPM (operational risk) do not
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10. represent what ERM tries to accomplish,
although they are essential designations in
their respective fields. Enterprise risk
professional training and designation
would complement them, and would
aim to work alongside them but from a
strategic and top-down perspective.
CONCLUSION: RISK
CULTURE
ERM represents an opportunity for
traditional risk managers to take on a
more strategic role, and assist their
enterprise to create value while
integrating all core risks and
opportunities, both existing and
emerging. However, without a strong
risk culture for the CRO to develop and
nurture, the chance of success will be
limited. In fact, an organisation that is
continuously in a crisis mode and
reacting to events is not in a risk
management mode, let alone an
enterprise risk mode, where it can
anticipate and position itself accordingly.
In fact, an organisation that has a
strong risk culture is one that is
forward-looking, has taken a strategic
approach to risk and opportunities and
embedded it throughout the
organisation. In addition, building a
strong risk culture implies that an
enterprise is willing to learn from its
mistakes and is sufficiently agile to
respond to emerging threats and
opportunities, not just wait for things to
happen and improve continuously,
allowing it to optimise its value.
Finally, developing a risk culture that
can sustain ERM takes time and a
continuous commitment by the
organisation. The tone must be set from
the top, yet the organisation’s people
must have a sense of ownership and
accountability. There must also be a great
deal of transparency, and excellent
communication by ERM’s primary
champion, the CRO.
References
1 Modigliani, F. and Miller, M. H. (1958)
‘The cost of capital, corporate finance and
the theory of investment’, American
Economic Review, Vol. 48, No. 3,
pp. 261–297.
2 Economist Intelligence Unit (2008)
‘The Bigger Picture: Enterprise Risk
Management in Financial Services
Organizations’, SAS and EIU, p. 6.
3 Lam, J. (2003) ‘Enterprise Risk
Management: From Incentives to
Controls’, Wiley Finance.
4 Arthur Andersen (2000) ‘Enterprise-Wide
Risk Management: Strategies for Linking
Risk and Opportunity’, Arthur Andersen.
5 Casualty Actuarial Society (2003)
‘Overview of Enterprise Risk
Management’, Enterprise Risk
Management Committee.
6 AIRMIC, IRM, ALARM (2002) ‘A Risk
Management Standard’, FERMA.
7 Risk and Insurance Management Society
(2008) ‘State of ERM 2008 Report’,
RIMS.
8 Liebenberg, A. and Hoyt, R., Terry
College of Business, University of Georgia
(2003) ‘The Determinants of Enterprise
Risk Management: Evidence from the
Appointment of Chief Risk Officers’,
Risk Management and Insurance Review,
Vol. 6, February, pp. 37–52.
9 Shimpi, P. A., Towers Perrin (2001)
‘Integrating Corporate Risk
Management’, Texere.
Further reading
Apgar, D. (2006) ‘Risk Intelligence:
Learning to Manage What We Don’t
Know’, Harvard Business School Press,
Boston, MA.
Barton, T. (2001) ‘Making Enterprise Risk
Management Pay Off ’, Financial
Executives Research Foundation.
From risk management to ERM
# Henry Stewart Publications 1752–8887 (2009) Vol. 2, 4 394–408 Journal of Risk Management in Financial Institutions 403
11. Chapman, R. J. (2006) ‘Simple Tools and
Techniques for Enterprise Risk
Management’, Wiley Finance Series.
Chew, D. H. (2008) ‘Corporate risk
management’, Journal of Applied Corporate
Finance.
DeLoach, J. W. (2000) ‘Enterprise-Wide
Risk Management’, Financial
Times-Prentice Hall, London.
Doff, R. (2007) ‘Risk Management for
Insurers, Risk Control, Economic
Capital and Solvency II’, Risk Books.
Merton, R. C. (2005) ‘You have more
capital than you think’, Harvard
Business Review, Vol. 83, No. 11,
pp. 84–94.
Moeller, R. R. (2007) ‘COSO ERM:
Understanding the New Integrated
ERM Framework’, John Wiley & Sons.
Monahan, G. (2008) ‘Enterprise Risk
Management: A Methodology for
Achieving Strategic Objectives’,
John Wiley & Sons.
APPENDIX A: THE MAIN
CHARACTERISTICS OF
RISK MANAGEMENT
FRAMEWORKS
† Control (silo-based) risk frameworks:
— cover a subset of risks including
insurance, hazard, financial and
operational;
— conduct risk management in silos;
— focus on the negative side of risks;
— mitigate risk through financial and
operational controls and insurance
coverage, such as:
W ISO standards;
W COSO I, COCO for
accounting;
W COBIT for IT risk;
W PRINCE for project
management;
W actuarial control cycle for
insurance products;
W BS 25999 (business
continuity);
W ISA 400, SAS 70 for controls
evaluation of service
organisations;
W quality management
approaches to reduce error
rates;
W IFC performance standards
on social and environmental
sustainability, such as the
Equator principles on social
and environmental risks.
† Compliance and regulatory risk
frameworks:
— focus on conformity to laws, rules,
regulations and internal policies;
— used to focus only on compliance
but have recently shifted to more
risk-based compliance; examples
include:
W SOX, JSOX, anti-money
laundering policy;
W Basel II pillar I (focused on
solo risk measurement
through capital estimation,
ICA);
W Solvency II Pillar I (a
compliance exercise but with
a wider set of risks);
W Turnbull Report on Internal
Controls;
W NAIC Risk-Based
Framework;
W UK FSA Organizational
Systems and Controls;
W Europe MIFID.
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12. † Governance frameworks:
— focus on high-level principles of
governance by organisations;
— establish roles, responsibilities
and delegation of authorities
to support ERM; examples
include:
W NYSE governance standards;
W the UK Cadbury Report;
W GRC — attempts to
streamline governance,
risk and compliance
functions;
W recent framework proposals
by the hedge fund and asset
management communities.
† Enterprise-wide risk (integrated/capital
based) management frameworks
(bottom-up):
— extend risk management to take a
consolidated view of existing risks
and assess additional risks like
liquidity, business and strategic,
reputational, environmental, social
responsibility; examples include:
W COSO ERM II;
W AS/NZS 4360;
W CAN/CSA-Q850;
W Moody’s RMA, Fitch risk
model and AM Best’s ERM;
W Basel II/Solvency II Pillars II
and III (extend the pure
compliance aspect to a wider
ERM framework and ORSA
for solvency II).
† Enterprise risk management (holistic/
value-based) frameworks (top-down):
— ISO 31000;
— Europe Risk Management Standard
by FERMA, ALARM, AIRMIC,
IRM;
— Standard & Poor’s ERM for
Financial Institutions;
— RIMS Risk Maturity Framework.
APPENDIX B: SOME ERM
VALUE-BASED DEFINITIONS
† Former Arthur Andersen ‘A structured and
disciplined approach that aligns strategy,
processes, people, technology, and
knowledge with the purpose of
evaluating and managing the
uncertainties the enterprise faces as it
creates value . . . It is truly holistic,
integrated, forward-looking . . . of
managing all key business risks and
opportunities with the intent of
maximizing shareholder value.’4
† The Casualty Actuarial Society (CAS):
‘ERM is a discipline by which an
organization in any industry assesses,
controls, exploits, finances and monitors
risks from all sources for the purpose of
increasing the organization’s short and
long-term value to its stakeholders.’5
† A Risk Management Standard by the
Federation of European Risk Management
Associations (FERMA), AIRMIC,
ALARM, IRM: ‘Risk Management is a
central part of any organization’s strategic
management . . . It is a process whereby
organizations methodically address the
risks attached to their activities with the
goal of achieving sustained benefit . . .
and understanding the potential
downside and upside of all the factors
which can affect the organization.’6
† Risk and Insurance Management Society
(RIMS): ‘ERM is the culture, processes,
and tools to identify strategic
opportunities and reduce uncertainty. It
is a comprehensive view of risk both
from operational and strategic
perspectives and is a process that supports
the reduction of uncertainty and
promotes the exploitation of
opportunities.’7
(Although not explicitly
stated, value creation is implied in this
definition and in the standard.)
From risk management to ERM
# Henry Stewart Publications 1752–8887 (2009) Vol. 2, 4 394–408 Journal of Risk Management in Financial Institutions 405
13. † Center for Strategic Risk Management,
University of Georgia’s Terry College of
Business: ‘ERM is a corporate wide, as
opposed to departmentalized, effort to
manage all the firm’s risks — in fact, its
total liability structure — in a way that
helps management carry out its goal of
maximizing the value of the firms’
assets.’8
† Towers Perrin: ‘A rigorous approach to
assessing and addressing the risks from all
sources that threaten the achievement of
an organization’s strategic objectives. In
addition, ERM integrates those risks that
represent corresponding opportunities to
exploit for competitive advantage.’9
APPENDIX C: A JOB
DESCRIPTION FOR A CRO
Develop, maintain and evolve a
value-based ERM framework that serves
to identify, assess and manage all core
risks and opportunities that are in line
with the enterprise strategic goals, values,
culture and risk appetite.
† Establish and update the appropriate
ERM governance framework, proper
roles and responsibilities, and policies.
† Develop, communicate and monitor —
dashboard — the risk appetite statement
of the organisation.
† Establish an appropriate compensation
programme that links value, risks and
performance incentives.
† Actively participate in the strategic
decisions of the organisation, bringing
that risk/opportunity perspective in
initiatives like new markets, products and
services, mergers and acquisitions, annual
planning etc.
† Develop expertise in ERM processes for
core risks and opportunities and their
potential impact on reputation and value:
identification, evaluation, measurement
and management of core risks, SWOT
analysis, correlations and horizontal view
of risks — value chain — in products
and services, IT, HR, financial and
operational risk processes, risk controls,
corporate insurance, risk monitoring
(IT system), risk resilience (business
continuity) and compliance.
† Develop and implement appropriate risk
intelligence processes to anticipate
emerging risks and opportunities
(especially unexpected situations) by
evaluating the potential impact on
the value of the firm, both from
financial and non-financial risks —
known unknowns and unknown
unknowns.
† Develop the appropriate value metric (eg
financial, like earnings-at-risk and cash
flow-at-risk, and non-financial, like
sustainability index) that fits with the
strategic goals of the organisation, its
culture and its environment along with
other metrics like Balanced Scorecard,
KPIs, KRIs.
† Align risk management and capital
structure decisions: economic capital,
capital budgeting decisions, cost/benefit
analysis of newer risk management
activities, capital allocation to business
units.
† Reassess the ERM framework in light of
company and external development and
audit recommendations.
† Be the primary liaison on ERM issues
with external parties: regulators,
rating agencies and the financial
community.
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14. APPENDIX D: SUMMARY OF POTENTIAL ERM DESIGNATIONS
AND THEIR SPONSORING ORGANISATIONS
Organisation Credential Comments
Global Association of Risk
Professionals (GARP)
Financial Risk Manager (FRM)
& Associate (November 2009)
Mostly large international banks/
investment management firms
Mostly focused on financial risks
Agreements with universities to
train their FRM candidates
Specialised certificates in energy,
banking and regulation, risk in
Islamic financial institutions
Professional Risk
Managers’ International
Association (PRMIA)
Professional Risk Manager
(PRM)
Focus on financial institutions like
banks, asset managers and
insurance companies
Focus on financial, operational
and strategic risks
Agreements with universities
to train the PRM candidates
New Associate PRM designation
PRMIA Institute is their continuing
education arm
Co-sponsor of the annual ERM
symposium
Actuarial organisations
— Society of Actuaries
(SOA)
Chartered Enterprise Risk
Analyst (CERA) in addition
to its FSA designation
Mostly focused on the insurance/
pension industries
Highly focused on the quantitative
aspect of certain risks
Main sponsor of the annual ERM
symposium with CAS
— Casualty Actuarial
Society (CAS)
No risk designation per se
but its FCAS
Work with ERM II to develop links
with universities
— Canadian Institute of
Actuaries (CIA)
No risk designation per se but
its FCIA/FICA
Co-sponsor of the ERM
symposium and other risk projects
— International Actuarial
Association (IAA)
Development of an
international ERM designation
Global association of actuarial
organisations which supports the
profession worldwide
Each country has admission
standards, continuing education
requirements, standards of
practice, disciplinary processes
Americas
— Risk and Insurance
Management Society
(RIMS)
RIMS Fellow for experienced
risk professional
Issued in conjunction with
these basic risk management
designations: Associate in
Risk Management (ARM);
Canadian Risk Management
(CRM)
Traditional insurance risk and risk
finance professionals in all
industries with a high
concentration in the corporate
sector
Basic designations highly focused
on the traditional risk
management process
RIMS has taken on ERM as one of
its newer sectors
Continued
From risk management to ERM
# Henry Stewart Publications 1752–8887 (2009) Vol. 2, 4 394–408 Journal of Risk Management in Financial Institutions 407
15. Continued
Organisation Credential Comments
— National Alliance for
Insurance Education and
Research
Certified Risk Manager (CRM)
— ALARYS for South
America
Alarys International Risk
Manager (AIRM)
Australia/NZ
— Risk Management
Institution of Australasia
(RMIA)
Certified Practicing Risk
Manager (CPRM)
Certified Risk Management
Technician (CRMT)
RMIA is the author of the AS/NZS
4360 Risk Management Standard
Asia
— Asian Risk Management
Institute (ARiMI)
Enterprise Risk Manager
(ERM)
Certified Professional Risk
Manager (CPRM)
Fellow in Applied Risk
Management (FARM)
Done in collaboration with the
university of Singapore
Based in insurance but with
extension to ERM topics
Europe
— Federation of European
Risk Management
Associations (FERMA)
A pyramid of risk designations
from the Diploma and
Certificate to Fellowship
issued by the Institute of Risk
Management (IRM)
FERMA is an organisation of
European risk organisations
dedicated to the wide-ranging risk
interests of its members, both
from the public and private
sectors
Promotes the use of the Risk
Management Standard
— Association of Insurance
and Risk Managers (AIRMIC
in the UK)
Insurance managers but with an
interest in ERM development and
implementation
Public sector risk
management associations
— PRIMA/PARMA in North
America
— ALARM in the UK
No designation per se Associations dedicated to the risk
management needs of the public
sector in the USA/UK
University-based risk
education
— Business schools
— Actuarial schools
— Financial engineering
schools
— Risk management
schools
MBA/master/PhD degrees in
insurance and risk
management
Many offer some ERM-focused
courses along with their
association with professional
risk organisations
Some are offering ERM type
courses as well; for example
Stanford University Certificate in
Strategic Risk Management and
Master Certificate in ERM by CBET
at the University of Waterloo
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