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Enterprise Risk Management: from Resistance to Resilience

NASACT 2014 Annual Conference

Bill Brown, Principal, BerryDunn

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DISCUSSION POINTS

• What is Enterprise Risk Management (ERM)?

• Why is it necessary?

• How can it benefit your organization?

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WHAT IS ERM?

Enterprise Risk Management (ERM) is a holistic approach to identifying, measuring, prioritizing and addressing the risks of an organization at the enterprise level.

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• Encourage strategic alignment

• Standardize core knowledge

• Drive success

• Support organizational values

• Take a long-term outlook

• Be internally managed

• Leverage technology

• Improve quality

WHAT IS ERM? COMMON STANDARDS & OBJECTIVES

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WHAT IS ERM?8 PRINCIPLES

ERM

Assess risk environment

Determine expected vs unexpected

Understand risks & current controls

Identify risk activities

Mitigation & mgmt

planning

Assign ownership

Provide governance

Monitor

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THE BUILDING BLOCKS OF ERM

• Consistent approach

• Government as a single, unified entity

• Shared risk appetite across agencies

• Consistency among diverse initiatives

• Formalized accountability and ownership

• Process to escalate and report risks

• Leadership review of strategic risk initiatives

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WHY IS TRADITIONAL RISK MANAGEMENT INADEQUATE?

Does not serve the organization as a whole

Inefficiently allocates scarce resources

Ignores the goal of resiliency

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CHARACTERISTICS OF A SUCCESSFULERM PROGRAM

Transparent, holistic, and focused on resiliency

Include action-based frameworks

Encourage enterprise-

wide collaboration

Include a formal

reporting process

Encourage proactive

discussions

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A HOLISTIC SOLUTION IS CRITICAL

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SUCCESSES ARE QUIET. EVENTS (AND FAILURES) ARE NOISY.

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CASE STUDY: INTEGRATED ERM PROGRAM

State AgenciesManage Risks

Monitor ComplianceImplement Corrective Action

Report Results

ERM CommitteeCompliance OversightDiscuss/Review KRIsReview Dashboards

Review/Update Action Chart

Internal AuditAssess Compliance

Report Results

ERM DashboardBusiness Unit KRIs

ChartsAction Plans

Controllers’ OfficeReview ERM Committee Results

Present to Governor’s Office

Governors’ OfficeReview Strategic KRIs

Review DashboardFeedback on Strategic Direction

Feedback on Risk Appetite

Audit Committee

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BENEFITS OF ERM

Risk

Cost of Controls

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RESILIENCE: THE PROPER GOAL OF ERM

THANK YOU! QUESTIONS?

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Bill Brown, CPA, CFE, MAFFPrincipal, BerryDunn bbrown@berrydunn.com