Governance in Enterprise Risk Management Presented by Michael Lawrence Monday 10th October 2016 APM North West branch and Risk SIG conference Alderley Park, Macclesfield

1. Trusted to deliver excellence
© 2016 Rolls-Royce plc and/or its subsidiaries
The information in this document is the property of Rolls-Royce plc and/or its subsidiaries and may not be copied or communicated to a third party, or
used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc and/or its subsidiaries.
This information is given in good faith based upon the latest information available to Rolls-Royce plc and/or its subsidiaries, no warranty or representation
is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc and/or
its subsidiaries.
Governance in Enterprise Risk
Management
APM Conference
Michael Lawrence

2. Trusted to deliver excellence
© 2016 Rolls-Royce plc and/or its subsidiaries
The information in this document is the property of Rolls-Royce plc and/or its subsidiaries and may not be copied or communicated to a third party, or
used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc and/or its subsidiaries.
This information is given in good faith based upon the latest information available to Rolls-Royce plc and/or its subsidiaries, no warranty or representation
is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc and/or
its subsidiaries.
About Rolls-Royce
Section 1
Michael Lawrence

3. Trusted to deliver excellence
© 2016 Rolls-Royce plc
The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other
than that for which it is supplied without the express written consent of Rolls-Royce plc.
This information is given in good faith based upon the latest information available to Rolls-Royce plc, no warranty or representation is given concerning
such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc or any of its subsidiary or
associated companies.

8. We don’t make these

10. Trusted to deliver excellence
© 2016 Rolls-Royce plc and/or its subsidiaries
The information in this document is the property of Rolls-Royce plc and/or its subsidiaries and may not be copied or communicated to a third party, or
used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc and/or its subsidiaries.
This information is given in good faith based upon the latest information available to Rolls-Royce plc and/or its subsidiaries, no warranty or representation
is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc and/or
its subsidiaries.
Why risk management is
important
Section 2
Michael Lawrence

11. What was the year?
11

12. Do We Need to Manage Risks?
Click each tab for more information. Click the ‘next’ button to continue.
1971
Rolls-Royce Declared
Bankrupt
2010
Rolls-Royce Qantas A380
Engine Explosion
2013
Formal Bribery Investigation
at Rolls-Royce
News Source: http://www.telegraph.co.uk/
Screen 16

13. Do We Need to Manage Risks?
1971
Rolls-Royce Declared
Bankrupt
2010
Rolls-Royce Qantas A380
Engine Explosion
2013
Formal Bribery Investigation
at Rolls-Royce

14. Do We Need to Manage Risks?
1971
Rolls-Royce Declared
Bankrupt
2010
Rolls-Royce Qantas A380
Engine Explosion
2013
Formal Bribery Investigation
at Rolls-Royce
News Source: http://www.bbc.com/news/business-23076586/

15. Do We Need to Manage Risks?
Click each tab for more information. Click the ‘next’ button to continue.
1971
Rolls-Royce Declared
Bankrupt
2010
Rolls-Royce Qantas A380
Engine Explosion
2013
Formal Bribery Investigation
at Rolls-Royce
News Source: http://www.telegraph.co.uk//
Screen 16
You have now seen various examples on how not managing risks properly resulted in severe losses and even closure of businesses.
We would like to think these things cannot happen at Rolls-Royce. But could they?

16. Risks and our share price

17. The impact of risks on our share price
• 17

18. Risks and our share price
A: £5.6bn

19. Trusted to deliver excellence
© 2016 Rolls-Royce plc and/or its subsidiaries
The information in this document is the property of Rolls-Royce plc and/or its subsidiaries and may not be copied or communicated to a third party, or
used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc and/or its subsidiaries.
This information is given in good faith based upon the latest information available to Rolls-Royce plc and/or its subsidiaries, no warranty or representation
is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc and/or
its subsidiaries.
Corporate governance
Section 3
Michael Lawrence

20. Sir Ian Davis
20

21. Risk concentration
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22. Closer link between risk and business
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23. The Code: Comply or explain….
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24. Robust assessment
24

25. Appetite
25

26. Viability
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27. Board oversee effectiveness
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28. Trusted to deliver excellence
© 2016 Rolls-Royce plc and/or its subsidiaries
The information in this document is the property of Rolls-Royce plc and/or its subsidiaries and may not be copied or communicated to a third party, or
used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc and/or its subsidiaries.
This information is given in good faith based upon the latest information available to Rolls-Royce plc and/or its subsidiaries, no warranty or representation
is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc and/or
its subsidiaries.
Our response
Section 4
Michael Lawrence

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Rolls-Royce Proprietary Data
Identify Principal Risks (PR)
Impact of PRs on Long Term
Viability
Set Risk Appetite for PRs
Monitor Mitigation & Controls
of PRs
Governance of PRs
Reporting
AssessEffectivenessof
RiskManagementSystem
Risk Management Process
Effectiveness is measured in two steps:
1) Where is risk management being performed?
2) Is it performed to an acceptable standard?
3) What incidents have happened?

37. Enterprise Risk Management Framework 37
Process1 Hierarchy Tools
Plan
Identify
Assess
Treat
Review
Close
Risk management culture
Risk organisation3 and training
Supporting
technology
Risk
appetite2
Templates
and guides
Risk
policy
Group
RMP
Assurance
1) Board
2) Board
committees
3) ELT risk
committee
4) Business /
Functions
5) Sub-Business /
Major Projects
Governance & Committees
Effectiveness
measures & KRIs
1 Risk process is in Rolls-Royce Management System and is integrated with Strategy, Capex, PM and MI&F
2 Appetite expressed using impact categories and Group escalation criteria
3 ERM central, Champions, Co-ordinators & Facilitators
Principal
risks
Key risks
Business/Function
risks
Sub-Business /
Major Projects
Group risk register
Incident
reporting
Deep
dives

38. Trusted to deliver excellence
© 2016 Rolls-Royce plc and/or its subsidiaries
The information in this document is the property of Rolls-Royce plc and/or its subsidiaries and may not be copied or communicated to a third party, or
used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc and/or its subsidiaries.
This information is given in good faith based upon the latest information available to Rolls-Royce plc and/or its subsidiaries, no warranty or representation
is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc and/or
its subsidiaries.
Benefits
Section 5
Michael Lawrence

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46. This presentation was delivered
at an APM event
To find out more about
upcoming events please visit our
website www.apm.org.uk/events