Enterprise risk management (ERM) is like keeping a doctor on hand for the whole business. Colin Knox has built a very successful career working in insurance and risk management. In an article for Risk Management Magazine, Russ Banham has sat down with Knox in an interview to discuss his expertise.
A Check Up for Strategy & Operation
ERM is not a tool to help companies get precisely what they want, but rather it is a way to understand things and better achieve strategic plans. This all begins with understanding the company and its overall strategy initiatives. Once things are better understood, you can then better identify the tools and people that will be required to implement that strategy. ERM is the foundation to this success.
Establishing the strategy falls on the shoulders of the CEO and the board. They make all of the decisions about the direction of the strategy and where they hope the company will be in the future. Then the duties fall to the risk manager to project the progress and analyze the adversities. They are tasked with understanding the operational risks because they can better see the day-to-day problems that may arise.
Risk managers have the responsibility to help bridge the gap between strategic and operational concerns. Some of the risks are one in the same; for example, if the company produces wine in Napa Valley, the threat of an earthquake becomes both strategic and operational. Strategically, the company would not want to solely rely on wine from Napa Valley, while operationally, the company would look to seismic studies and better assess how to handle if an earthquake were to occur.
When it comes to managing risks, governance is the key. The management of risks falls on every employee because they each can monitor the risks associated with their own jobs. This allows for the top team to actively engage ERM daily.
Implementing ERM can be a wonderful asset, but only if everyone understands its importance. If every employee does not buy into it and make it a part of the business culture, ERM will not reach its potential. You can read the original article here: http://www.rmmagazine.com/2015/10/01/qa-the-strategic-value-of-erm/